Income Tax Appellate Tribunal - Indore
Shyam Manohar Agarwal, Bhopal vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARMA, A.M. PAN NO. : AAXPA-1999A I.T.(SS) A.Nos.242 to 244/Ind/2012 A.YS. : 2005-06 TO, 2007-08 Shyam Manohar Agarwal, Bhopal vs. ACIT, 3(1), Bhopal Appellant Respondent I.T.(SS) A.Nos.283 & 284/Ind/2012 A.YS. : 2005-06 TO, 2007-08 ACIT, 3(1), Bhopal vs. Shyam Manohar Agarwal, Bhopal Appellant Respondent Appellant by : Shri H.P.Verma and Shri N. D. Patwa, Adv, Respondent by : Shri V.K.Karan, CIT DR Date of Hearing : 07.05.2013 Date of pronouncement : 29.05.2013 O R D E R PER R. C. SHARMA, A.M.
These are the cross appeals by the assessee and Revenue against the order of CIT(A) for the assessment years 2005-06, 2006-07 and 2007-08.
Rival contentions have been heard and records perused. Facts in brief are that the Assessee is a real estate broker and aggregator. A search and seizure operation u/s 132(1) of the Income Tax Act 1961 was carried out in the case of Shyam Manohar Agarwal on 05.01.2007. During the search and seizure operation u/s 132(1), documents relating to assessee Shri Shyam Manohar Agarwal were also found. After recording reasons, notice u/s 153A was issued on 22.01.2008. Various additions were made by the Assessing Officer in different years, which are detailed as under.
A.Y. 2005-06 :
In this year, a legal ground has been taken by the assessee to the effect that warrant of authorization u/s 132(1) was issued jointly in the name of assessee and Shri Jitendra Purohit, therefore, the order framed in the name of Shyam Manohar Agarwal is unjustified and bad in law.
We have considered the rival submissions and found from record that warrant was issued authorizing search in the case of two individuals. Neither warrant was issued for searching an AOP nor any AOP has been searched. Accordingly, no search was possible in the case of AOP which did not exist. Accordingly, we do not find any infirmity in the order of Assessing Officer framing assessment in the hands of assessee as an individual.
The assessee is also aggrieved for addition of Rs. 20,45,000/-. In this regard, we found that for the assessment year 2005-06, the assessee has filed return u/s 139 on 23.9.2005 showing income of Rs. 5,04,221/-. Thereafter, in pursuance to notice u/s 153A, return was filed on 28.11.2008, declaring income of Rs. 24,59,245/- including surrendered income of Rs. 3.50 lakhs. The Assessing Officer observed that books of account of the assessee showed cash credit, which have been detailed at page 6 of the Assessing Officer's order. Total of such credits was computed by the Assessing Officer at Rs. 20,45,000/- on page 7 & 8 of the assessment order. The details of such credit was as under :-
Date Name of Person Amount Cash / Cheque Repaid / Adj. on Cash / Cheque 22.04.2004 Chandra Kanta Agrawal 235000 Cheque 20.09.04 Cheque 12.02.2004 Chandra Kanta Agrawal 150000 Cheque 20.09.04 Cheque
2.3.2005 Amar Chandra 100000 Cheque 12.9.05 Cheque 17.5.2004 Baldev/Mohan Lal Garg 100000 Cheque 4.12.2004 Baldev/Mohan Lal Garg 100000 Cheque 50000 3.11.05 Cheque 6000 31.5.05 Cheque 100000 29.11.05 Cheque 25000 24.6.06 Cheque 19000 1.7.06 Cheque 7.7.2004 Gurumukha Chawala 150000 Cheque 9.12.04 Cheque 2.6.2004 Kiran Goel 100000 Cheque 16.10.04 Cheque 4.1.2005 Lajwanti Mata 50000 Cheque 15.03.07 Cheque 4.2.2005 Lajwanti Mata 80000 Cheque 15.03.07 Cheque 4.2.2005 Lajwanti Mata 80000 Cheque 15.03.07 Cheque 2.3.2005 Lakhan 100000 Cheque 14.09.05 Cheque 2.3.2005 Lakhan 100000 Cheque 20.11.06 Cheque 17.08.2004 Lawina Wadhwani 50000 Cheque 17.03.06 Cheque 31.05.2004 Radha Agrawal 50000 Cheque 24.01.05 Cheque 8.7.2004 Shiv Narayan/ Mahesh 50000 Cheque 9.7.2004 Shiv Narayan/ Mahesh 50000 Cheque 10.7.2004 Shiv Narayan/ Mahesh 50000 Cheque 12.7.2004 Shiv Narayan/ Mahesh 250000 Cheque 2.11.2004 Shiv Narayan/ Mahesh 200000 Cheque 300000 27.11.04 Cheque 300000 30.11.04 Cheque Before the Assessing Officer, the assessee made written submissions which are placed at page 49 of the paper book incorporating various proofs in respect of the credits. As the creditors did not cooperate the assessee for appearing before the Assessing Officer, to buy peace, he submitted that the credits may be treated as his undisclosed income and requested the Assessing Officer to add peak credit of the loans. The request was also made that credit in the name of Smt. Chandrakanta Agarwal W/o assessee amounting to Rs. 2,35,000/- and Rs. 1,50,000 was genuine as the same was given by account payee cheques. Loan confirmation was also filed. Both the amounts were also repaid on 20.9.2004 by cheque. However, the Assessing Officer did not accept assessee's plea and added the entire amount in assessee's income. However no credit of income of Rs. 3,50,000/- surrendered by assessee in revised return was given. By the impugned order, the ld. CIT(A) confirmed the action of the Assessing Officer.
We have considered the rival submissions and found from record that the assessee was unable to substantiate any of the cash credit except the credit in the name of Smt. Chandra Kanta Agarwal. With regard to the loan taken from wife Smt. Chandrakanta Agarwal, we found that the assessee has received loan amounting to Rs. 2,35,000/- by cheque No. 72644 of State Bank of Indore Marwari Road, Bhopal, on 22.04.2004 and Rs. 1,50,000/- by cheque No. 72645 of State Bank of Indore Marwari Road, Bhopal. The above sums were refunded on 20-09-2004 by cheque no. 94017. It is pertinent to mention that Smt. Chandra Kanta Agarwal is wife of the assessee and she is also assessed u/s 153A simultaneously. All these documentary evidences discharges initial onus casted on assessee with regard to identity, genuineness and creditworthiness. Accordingly, we direct the Assessing Officer to delete the addition of Rs. 3,85,000/- ( Rs. 2,35,000 + 1,50,000). As the assessee himself has surrendered income of Rs. 3,50,000/- in the revised return filed u/s 153A, the same requires to be adjusted against the addition so made by AO. Accordingly, we do not find any merit in the order of CIT(A) for confirming the addition of Rs. 20,45,000/- made by Assessing Officer u/s 68 of the Income-tax Act, 1961.As the assessee had surrendered a sum of Rs. 3.50 lacs in the return filed u/s 153A, the same deserves to be reduced out of addition made on account of cash credit/land advance. Thus finally we confirm, the addition of Rs, 13,10,000 ( 20,45000 -3,50,000 - 3,85,000) It is pertinent to mention here that assessee has requested to consider the peak amount of credit. The contention of assessee has a substance insofar as all receipts and payment on account of cash credit/land advance has been conceded and owned by assessee. However, since we have allowed telescoping on entire addition against various unaccounted payment/expenditure made by assessee, as per our discussion hereinafter, we are not considering the contention of assessee with regard to adding the peak amount of credit.
In ground no. 5, assessee is aggrieved for addition of Rs. 1,44,000/- as income from house property. The facts of the issue in brief are that the assessee owns a property situated at Nayapura Lal ghati, Tehsil Huzur, Bhopal. This property has given on rent to M/s Shri Sainath Marbles as per the rent agreement seized during the course of search this property is given on monthly rent of Rs. 14,000/-. The A.O. held that this premises was given on rent during the year in appeal also. He found that the appellant had shown rental income of Rs. 24000/- only. He worked out the rental income for the whole year at Rs. 168000/- and made addition of Rs. 144000/-on this account.
Contention of assessee before the CIT(A) was as under :-
"Copy of rent agreement executed between Shri Sainath Marbla and the assessee has been found during the course of search and the same is marked as LPS-7/Page 52 to 54. This agreement has been executed on 14.01.2002. According to this agreement, for a period of 11 months, starting from 1.11.2001 and ending 30.09.2002, property situated at Nayapura Lalghati, Bhopal has been given to the lessee for a month rent of Rs. 14,000/- which was payable monthly. The lessee was also required to provided security deposit of Rs.50000/-. Copy of the agreement has been seized during the course of search. Therefore, the provisions of Section 292C are applicable and it is presumed, until shown contrary, that the contents of such a document are true. During the course of entire search and assessment proceeding, no evidence is found to rebut the statutory presumption. Thus according to this agreement it is presumed that 1) assessee has received Rent of Rs.56,000/- in F.Y. 2001-02, 2) Security deposit of Rs.50,000/- in F.Y. 2001-02 and 3) Rent of Rs.98,000/- in F.Y. 2002-03. Thus the total addition in different year is calculated as under:-
Ass. Yr Rent Shown Amount received as Pre agreement Addition made by A.O. Addition sustainable Remark 2002-03 36,000/-
56,000/-
Security deposit 20,000/-
50,000/-
20,000/-
--
Security deposit is not income 2003-04 3,000/-
98,000/-
1,65,000/-
95,000/-
The A.O. has calculated addition on the basis of this agreement even in subsequent years without realizing that the lease agreement was valid only for a period of 11 months. There is no iota of evidence on record which can suggest that the agreement had been renewed for further periods. The agreement found during the course of search is presumed to show true state of affair. No addition on the basis of certain imaginary receipts of rent can be sustained in future periods. Thus all the additions made by the A.O. on account of alleged undisclosed rent in A.Y. 2004-05 to 2007-08 cannot be sustained. The addition of Rs.144,000/- made by the A.O. may kindly be deleted. After considering assessee's contention, the ld. CIT(A) confirmed the action of the Assessing Officer after having the following observations :- "5.3 I have examined the issue. The appellant has taken the plea that the agreement was only for 11 months but has not negated the fact that the premises was still given on rent during the year in appeal. The appellant has shown rental income of Rs. 24,000/-. This fact confirms that the premises is given on rent during the year in appeal also. In view of the above it is held that the addition of Rs. 1,44,000/- as undisclosed rental income is valid hence the same is confirmed. This ground of appeal is dismissed."
We have considered the rival submissions and found from record that premises of assessee was given on rent during year under consideration at a monthly rent of Rs. 14,000/-. Rent for the whole year works out to Rs. 1,68,000/-, however, the assessee had shown rental income of Rs. 24,000/- only. Accordingly, we do not find any infirmity in the orders of lower authorities for making and upholding addition of Rs. 1,44,000/- ( Rs. 1,68,000/- (-) Rs. 24,000/- ) on this account.
In ground no.6, the assessee also aggrieved for enhancement of income by CIT(A) by Rs. 45,000/-. The facts of the issue in brief are that the assessee held a land owned by Shri Laxmi Narayan under Power of Attorney. He sold this land to Archana Kochar and Seema Saxena for consideration of Rs. 45,000/-. The Assessing Officer held that this receipt has not been accounted for and made addition of Rs. 45,000/- on this account in the assessment year 2006-07.
By the impugned order, the ld. CIT(A) confirmed the addition after having the following observations :-
"6.3 I have examined the issue. The appellant has admitted that the unaccounted sales incurred on 17.11.2004. This does not pertain to P.Y. relevant to assessment year 2006-07 but pertains to the P.Y. relevant to assessment year 2005-06. In view of this undisputed fact it is clear that the amount of addition of Rs. 45,000/- should have been made in assessment year 2005-0-6. In view of this finding the amount of addition of Rs. 45,000/- is made in assessment year 2005-06 and the additions for assessment year 2205-06 is enhanced by Rs. 45000/-. The Assessing Officer is directed to add this amount in computation of total income of assessment year 2005-06 while passing the appeal effect order. This ground of appeal is dismissed."
We have considered the rival submissions and found from record that unaccounted sales were found on 17.11.2004, which pertains to financial year 2004-05, relevant to assessment year 2005-06. Accordingly,, the CIT(A) was justified in making addition in the assessment year 2005-06, which was wrongly made by the Assessing Officer in the assessment year 2006-07.
A.Y. : 2006-07 :The assessee is aggrieved by addition of Rs. 6,000/- on account of unrecorded sales. The facts of the case in brief are that the assessee held a land belonging to Badami Lal on Power of Attorney. He sold this land on 6.2.2006 for a consideration of Rs.6000/-. Since this receipt was unaccounted, the Assessing Officer made addition of Rs. 6,000/-.
By the impugned order, the ld. CIT(A) confirmed the addition by observing that facts of receipt of Rs. 6,000/- was not disputed by the assessee. We found that the assessee was holding the loan on Power of Attorney and he has not made any investment on this account, accordingly, consideration so received was without any cost. Accordingly, we do not find any infirmity in the action of the CIT(A) for confirming the addition.
In ground No. 5, the assessee is aggrieved for addition of cash credit of Rs. 94,60,000/-. The Assessing Officer has dealt with the issue at page 7 para 3. The ld. CIT(A) has deliberated the issue at para 8 of page 8 of his order.
The facts of the issue in brief are that the assessee had shown cash credits and credit against land advance totaling to Rs. 94,60,000/- during the year in appeal. The Assessing Officer held that the source of this cash credit and land advance was unexplained and made addition of Rs. 94,60,000/- u/s 68.
From the record, we found that original return for assessment year 2006-07 was filed by the assessee u/s 139 declaring income of Rs. 6,54,717/-. However, in the return filed u/s 153A, the assessee showed income of Rs. 1,10,52,242/-. Thus, additional income of Rs. 1,03,97,525/- was declared in the return filed u/s 153A. A sum of Rs. 59,86,000/- was surrendered by assessee in this return.
With regard to the addition on account of cash credit so made, the Assessing Officer required the assessee on 8.12.2008 to furnish creditors bank account, copy of their returns of income and to produce the creditors in person. As the assessment was time barring on 30th December, 2008, it was not possible to comply with the requirement within a short period, accordingly, the assessee owned the total amount of Rs. 94,60,000/- by stating "with a view to buy peace with the Department in view of the difficulty in producing the witnesses connected with the land deals and difficulty in producing documents in view of the stringent penal provisions of stamp duty, un-conditionally owns these amounts of Rs. 94,60,000/- as the own money of the assessee, which has been introduced in the books under various names as land advances.
By the impugned order, the ld. CIT(A) confirmed the addition of Rs. 94,60,000/- u/s 68 after having the following observations :-
" I have examined the issue. In the submissions made before me the appellant has admitted that he does not have relevant information and documents to explain the source of cash credits totaling to Rs. 946000/-. He has admitted that the source of the cash credit is unexplained by stating that the amount is surrendered for taxation and telescoping benefit for this addition may be allowed against other additions in the F.Y. relevant to year in appeal and subsequent year. In view of these facts the addition of Rs.9460000/- u/s 68 is confirmed. This ground of appeal is dismissed."
It is clear from the above that ld. CIT(A) confirmed the action of the Assessing Officer without allowing set off of Rs. 59,86,000/- surrendered by the assessee in its return as undisclosed income. From the record, we also find that in respect of the credits appearing in the name of District Infrastructures Limited, Indore, of Rs. 10 lakhs, the assessee made the following submissions before the Assessing Officer :-
"I have received an advance of Rs. 10,00,000/- from District Infrastructure Limited by account payee cheque. Copy of the cheque is being enclosed herewith for your reference. M/s. District Infrastructure limited is having Bank Account with ING Vysya Bank Limited, Malviya Nagar Branch, Bhopal and its account Number is 358011001124."
The assessee submitted the following to the ld. CIT(A) :-
Copy of ledger account of District Infrastructure Limited. P.B.324 Photocopy of account payee cheque for Rs. 10,00,000/- P.B. 325 Audited accounts for the payer P. B. 326 - 332 Balance sheet - other advances From District Infrastructure to Shyam Agrawal. Rs. 10,00,000 P. B. 332. "
With regard to the credit in the name of Meena Agarwal, the assessee submitted copy of her account and copy of cheque no. 060050 dated 22.05.05 drawn on State Bank of Indore, Marwari Road, Bhopal, for Rs. 50,000/-. It is requested that credit for Rs. 50,000/- may please be given.
With regard to credit of Rs. 3 lakhs in case of M/s. Goel Cut Piece Centre, the assessee submitted copy of its account and copy of account payee cheque no. 314375 dated 29.06.05 drawn on Bank of Baroda, T. T. Nagar, Bhopal, for Rs. 1,00,000/-, though which payment was received.
However, the ld. CIT(A) did not agree with the assessee's contention and confirmed the entire addition of Rs. 94,60,000/-.
Rival contentions have been heard and records perused. As per the seized documents found during the course of search, the assessee was in receipt of cash credit of Rs. 1,27,50,000/- and land advance of Rs. 67,10,000/- lakhs totaling to Rs. 94,60,000/- from various persons.
Before the Assessing Officer, the assessee could not substantiate the source of credit and the land advance, accordingly, the entire amount was added by the Assessing Officer u/s 68 and the same was confirmed by CIT(A). From the record, we found that out of various land advance received, a sum of Rs. 10 lakhs was received by the assessee from the District Infrastructure Limited by account payee cheque. Copy of cheque was filed before the Assessing Officer. Bank account of District Infrastructure Limited, with ING Vysya Bank Limited, Malviya Nagar Branch, Bhopal, having account no. 3585011001124 was also filed before the Assessing Officer. Further, before the CIT(A), the assessee has filed copy of ledger account of District Infrastructure Limited, audited accounts of payer duly indicating payment of Rs. 10 lakhs. Balance sheet of the payer duly indicated amount of Rs. 10 lakhs by District Infrastructure to assessee Shyam Agarwal. Similarly, in respect of credit of filed from Meena Agarwal, the assessee has filed copy of her account and copy of cheque no. 06050 dated 22.5.2005 drawn on State Bank of Indore, Marwari Road, Bhopal, for Rs. 50,000/-. Similarly, in respect of land advance received from the Goyal Cut Piece Centre amounting to Rs. 3 lakhs, the assessee has submitted copy of its account and copy of account payee cheque no. 314375 dated 29.6.2005, drawn on Bank of Baroda, T. T. Nagar, Bhopal, for s. 1 lakh. From the order of Assessing Officer and CIT(A), it appears that very short time was given by the Assessing Officer to substantiate the source of payment. In the interest of justice and fair play, in respect of land advance received by the assessee from M/s. District Infrastructure Limited amounting to Rs. 10 lakhs, Meena Agarwal Rs. 50,000/- and Goyal Cut Piece Rs. 1 lakh, we restore the matter back to the file of Assessing Officer for deciding afresh after considering the documents discussed hereinabove. Needless to say that the assessee should be given due opportunity before deciding the issue afresh. Now remains credit of Rs. 83,10,000/- ( Rs. 94.60 lakhs (-) Rs. 11,50,000/-). It is pertinent to mention here that in the return filed u/s 1543A, the assessee has surrendered additional income of Rs. 59,86,000/-. This income was voluntarily shown and surrendered in the revised return which primarily resulted due to higher business income computed by assessee after analyzing the documents. It is not the case of revenue authorities that additional income surrendered amounting to Rs.59,86,000/- has been spent/invested by assessee somewhere. Thus, this income was available to the assessee, which he has introduced in the form of cash credit and land advance and finally agreed before the Assessing Officer. Since the assessees have already surrendered Rs. 59,86,000/- in the return of income filed u/s 153A for the assessment year 2006-07, the same is required to be adjusted against the addition made on account of cash credit which was accepted by the assessee. Accordingly, we direct the Assessing Officer to allow set off of Rs. 59.86 lakhs being the amount surrendered for the assessment year 2006-07 against the addition of cash credit of Rs. 83,10,000/- as worked out hereinabove.
In view of the above discussion, we confirm the addition of Rs. 23,24,000/- ( Rs. 83.10 lakhs (-) Rs. 59.86 lakhs). The issue with regard to credit in the name of District Infrastructure Rs. 10 lakhs, Meena Agarwal Rs. 50,000/- and Goyal Cut Piece Centre Rs. 1 lakhs is restored back to the file of Assessing Officer for deciding afresh in terms of our above observations.
It was also contention of the ld. Authorized Representative before the AO that telescoping of total addition on account of cash credit should be allowed against the unaccounted payments made by the assessee. It is pertinent to mention here that the assessee was in the business of real estate, therefore, he was in receipt of payment against sale of land as well as advance against sale. Similarly, he was making payment for purchase of land. As both these payments are unaccounted, therefore, the assessee is eligible for telescoping of these payments and the net amount received in excess of payment or net amount paid in excess of amount received is required to be added. Ld CIT (A) has also considered and allowed benefit of telescoping of various payments/expenditure while passing appellate order for A.Y 2007-08 at page Nos. 53 to 55 of his order dated 22.03.2012. Since the net amount on account of cash credit and land advance which have been finally confirmed by us as per our discussion herein above amounting to Rs. 23,24,000/-, we will consider the same for telescoping hereinafter.
The assessee is also aggrieved for addition of Rs. 1,68,000/- on account of rental income. We found that similar addition was challenged by assessee in the assessment year 2005-06. As discussed in assessment year 2005-06, following the same reasoning, we confirm the addition of Rs. 1,68,000/- in the assessment year 2006-07 also.
The assessee is also aggrieved for addition of Rs. 3.50 lakhs in respect of agreement found at other persons' place. The facts of the issue in brief are that during the course of search in the case of Shri Dilip Kukreja, a copy of agreement dated 20.11.2005 was found. As per this agreement the assessee had made investment of Rs. 3,50,000/- for transfer of a land from Shri Dilip Kukreja, Shri Amit Kukreja and Shri Kumar Kukreja. The Assessing Officer asked the assessee to submit explanation regarding the transaction but the assessee did not submit any explanation before him. The Assessing Officer held that the investment of Rs. 3,50,000/- is unaccounted and made addition of Rs. 3,50,000/- on this account.
By the impugned order, the ld. CIT(A) confirmed the action of the Assessing Officer after having the following observations :-
"11.3 I have examined the issue. The appellant has disowned the transaction only on the basis that the agreement was found during the course of search in case of Kukreja Brothers. This plea is not plausible. The agreement found is a valid agreement hence the transaction recorded in the agreement has to be explained. The plea that the agreement is not valid since it is not duly stamped is also not admissible since the default of Stamp Duty Act does not impair the agreement. Since the appellant has not explained the source of investment of Rs. 3,50,000/- as is evident in the agreement, the impugned addition of Rs. 3,50,000/- is confirmed. This ground of appeal is dismissed."
In view of the findings recorded by the ld.CIT(A), we do not find any infirmity in his order for confirming addition of Rs. 3.50 lakhs, in so far as assessee has not explained the source of investment of Rs. 3.50 lakhs, which is evident in the agreement.
The assessee is also aggrieved for addition of Rs. 14 lakhs on account of alleged receipts of land/farm house advance. The facts of the issue in brief are that in the document seized on page 7 of file no. LPS-1 the details of advance payment received for sale of farm land at Piplaner are mentioned. The advance received from seven persons are as under:-
Name of the person Form No. Amount received Anup Mittal 2,3 400000/-
Roli Mittal 12,15 300000/-
Nupur Agrawal / Rajesh Agrawal 5 200000/-
Manjula Agrawal 10 150000/-
Akshat Mittal 4, 11 350000/-
Swapnil Agrawal 1 200000/-
Total 1600000/-
The A.O. found that the appellant has shown receipt of Rs.200000/- from Shri Rajesh Agrawal in his account. Since he held that the balance receipt of Rs.1400000/- was unaccounted, hence he made the addition of the same amount.
Before the CIT(A), the contention of the assessee was as under :-
" During the course of search, a document LPS-1/Page 7 was found. This documents shows that the assessee has received Rs. 16,00,000/- as advance sale consideration. One of the entry pertaining to Nupur Agarwal/Rajesh Agarwal amounting to Rs.2,00,000/- has been received by cheque. In view of this fact, the entire documents was assumed to be true and addition of balance sum of Rs.14,00,000/- has been made in the assessment as unaccounted sale receipt. The assessee request that if addition on account of this item is made in the hands of assessee, as alleged out of book receipts, then, corresponding telescopic benefit may kindly be allowed against addition on account of alleged payment to agriculturist for purchase of Pipalner land Rs.20,00,000/- "
By the impugned order, the ld. CIT(A) confirmed his action of the Assessing Officer after having the following observations :-
"12.3 I have examined the issue. In the submissions made before me the appellant has not disputed that the receipt of Rs. 1400000/- was not accounted in his books. He has admitted that the unaccounted receipt is unaccounted by seeking telescoping benefit for the unaccounted amount received against the unaccounted payment for purchase of land at Pipalner for Rs. 2000000/-. In view of these facts it is held that the impugned addition of Rs. 1400000/- is valid hence the same s confirmed. This ground of appeal is dismissed. "
We have considered the rival submissions and found from record that seized paper LPS-1 showed receipt of Rs. 16 lakhs from 7 persons as advance sales consideration of farm land at Pipalner, out of this Rs. 2 lakhs was received by cheque from Rajesh Agarwal, which was duly accounted for in the books. Accordingly, balance amount of Rs. 14 lakhs ( Rs. 16 lakhs (-) Rs. 9 lakhs ) was added by the Assessing Officer. The assessee has requested for telescoping of this addition against the addition made on account of payment of Rs. 20 lakhs made for purchase of Pipalner land. We confirm the action of CIT(A) for addition of Rs. 14 lakhs, the issue of telescoping will be discussed lateron.
With regard to addition in respect of Pipalner agricultural land, we found that initially addition of Rs. 20 lakhs was made by the Assessing Officer on account of alleged payment to agriculturists/brokers for purchase of Pipalner land. However, by passing order u/s 154, an addition of Rs. 306 lakhs was made by the Assessing Officer. Before the CIT(A), the assessee has challenged entire addition of Rs. 3.06 lakhs. The Assessing Officer has discussed issue at page 12 to 23, starting from para 8. The ld. CIT(A) has discussed the issue at page 13 para 13. The Assessing Officer observed that not only the assessee has made payment to the farmers, but the farmers have further deposited the amount so received from the assessee in their Bank account and also made further investment.
Before CIT (A), the assessee had made following submissions :-
" The A.O. has made an addition of Rs. 20,00,000/- initially on account of alleged payment to agriculturists toward agreement of purchase entered by the assessee with certain persons who have initially made agreement of purchase from various Farmers. The agreement is alleged to have been made by the assessee. The A.O. has relied upon seized agreement dt. 27.032006, Statement of Power of attorney holders, statement of Farmers recorded u/s 131. Grievance of assessee was that the statements of farmers were recorded behind the back of the assessee and no opportunity was allowed by ao to cross-examine the witness as per Ld A.R these statements cannot be relied by the Assessing Officer in this assessment proceeding for want of cross examination. As per ld. Authorized Representative from admissible facts on record and documents which could be legally admitted in the proceeding, no other payment of any amount whatsoever is connected with the assessee during the financial year 2005-06 relevant to assessment year 2006-07. The only payment which is connected to assessee is initial payment of Rs. 20,00,000/- in cash on 27.03.2006. The assessee has denied making any further payment to farmers.
"Kindly refer to order assessment. Vide LPS 2/1-2, the assessee has received land advance from Sameer Chaudhary (Palasi land) in cash on 19.01.2006 which has been returned back on 02.02.06, also in cash. Similarly, vide ground No. 3.7, a sum of Rs. 14,00,000/- has been added as out of book advance received by the assessee. It is a settled principle that once source of money has been added, there is no cash for separate addition for investment made out of such source. In view of the facts and circumstances of the case, no separate addition of Rs. 20,00,000/- is warranted and the addition of Rs. 14,00,000/- and Rs. 6,00,000/- made as income from undisclosed source may kindly be telescoped and there would be no addition upon investment made of these out of book receipts and the same may kindly be deleted. Notice of enhancement dt. 07.02.2012 proposing to enhance the assessed income by a sum of Rs. 2,97,05,000/- has been issued. This income is related to a seized document LPS-12 page 30 to 34 which was an alleged agreement to purchase 18.65 acres land situated at village Pipalner, Tehsil Huzur, Dist Bhopal. The ld. A.O. has discussed the entire issue in his order of assessment of assessment year 2006-07 passed simultaneously with order of assessment of assessment year 2007-08. The A.O. has made entire addition of Rs. 3,06,00,000/- in assessment year 2006-07. The addition was challenged by me in assessment year 2006-07. During the course of appellate proceeding of assessment year 2006-07, on the basis of evidences on record and after considering my submissions, your honour were prima-facie convinced that apart from original signing amount of Rs. 20,00,000/-, no other payment appears to have been made in Financial year 2005-06 relevant to assessment year 2006-07. Therefore, this enhancement notice has been issued in respect of assessment year 2007-08. The assessee has to summarize factual position in this connection derived from seized material and discussion made in assessment order of assessment year 2006-07.
It is categorically denied that there is any admissible evidence on record to suggest that the alleged un-disclosed payment of Rs. 2,97,05,000/- to the persons described as sellers in the seized document No. LPS-12 Page 30 to 34. In the initial statement recorded in Mid Night of first day of search, the assessee under erroneous impression suggested that advance of Rs. 70,00,000/- was given by him till the date of search. However, in the second statement recorded during the course of search the assessee has corrected himself and admitted that he has paid only Rs. 20,00,000/- in cash towards this transaction.
From the perusal of LPS-12/Page 30 to 34, it appears that the actual owners of the 18.65 acres land namely 1) Mishrilal, 2) Jagdish 3) Dilip 4) Parvat Singh and 5) Ajab Singh *Hereinafter referred as ' Farmers', have entered into an agreement of sale with 1) Kishore Kotwani 2) Rambabu 3) Vijit Raj 4) Sanjay Sharma 5) Jawahar Kotwani 6) Subhash Jain and 7) Umesh Shukla, hereinafter referred as power of attorney holders'. The Power of attorney holders made initial payment to the Farmers.
The Power of attorney holders entered into alleged seized agreement LPS-12/Page 30 to 34 with the assessee whereby the assessee made initial signing payment of Rs. 20,00,000/- referred above.
The Farmers have issued a receipt LPS-12/Page 29 to the power of attorney holders to the effect that they have received sum of Rs. 74,00,000/- from power of attorney holders till 3-11-2006 in pursuance to their agreement LPS-12/Page 6 to 14.
LPS-12/Page 25 to 27 is copy of document of power of attorney executed by the Farmers in Favor of power of attorney holders.
Summon u/s 131 was issued to power of attorney holders by the Investigation wing. In compliance to that they have filed joint notarized affidavit as their statement. In their statement, the power of attorney holders have categorically admitted that the assessee, Shyam Manohar Agarwal, has made only payment of Rs. 20,00,000/- as initial signing amount and there after he has paid only a further sum of Rs. 15,00,000/- by cheques to them. It was also accepted that since the assessee did not made any further payment till 30.04.2006, the deal entered with the assessee became disputed. Copy of affidavit was provided to the assessee who cross examined power of attorney holders and thereafter re-examination was made by the A.O. and power of attorney holders sticked to their admission made in affidavit.
Statement of Farmers have been recorded by the A.O. copy of statements recorded were made available to the assessee only on 29-12-2008. The assessment was getting time barred on 31-12-2008. An opportunity was provided to the assessee to cross examine the farmers on 30-12-2008. It was requested to the A.O. that the time provided was too short to cross examine the farmers. The opportunity of cross examination was allowed merely with a view to avoid legal defect in the proceeding but the same was not a real, meaningful and effective opportunity of cross examination.
The assessee has to make the following submission to the issue of enhancement of assessed income as suggested in your notice.
It is categorically denied that the assessee has made any undisclosed investment in purchase of agriculture land of Rs. 2,97,05,000/- during financial year 2006-07 relevant to assessment year 2007-08 as alleged in the notice of enhancement.
In their statement filed before ADI, the power of attorney holders have categorically admitted that they have received initial payment of Rs. 20,00,000/- and further payment of only Rs. 15,00,000/- from the assessee which has been made through cheques. These payments have been duly recorded in books of assessee. Thus apart from payment of Rs.35,00,000/-, there is no evidence on record to suggest that the assessee has made any other payment towards this purchase transaction. It was also admitted that since the assessee has not made any further payment the deal became doubtful.
The assessee has made a further payment of Rs. 10,00,000/- to one of the Farmer, Parvat Singh, which is also duly recorded in books of the assessee.
The Farmers have given power of attorney in favour of power of attorney holders and not to the assessee at any point of time.
The A.O. was aware that the final registry of the agriculture lands was made in favor of other persons and not in favor of assessee. However, no material to this effect was brought on record to strengthen the false case of addition made by The A.O. He recorded the statement of the farmers at the very fag end of the proceeding and allowed mere one day time to the assessee to cross examine them.
The assessee has obtained copies of final registry of the agriculture lands from the Registrar office. The details of such registry have been summarized in the Annexure-A. The farmers have sold these lands to various buyers. The transactions has been executed by certain other power of attorney holders (other than original power of attorney holders) or by the farmers themselves directly receiving payment in cheques/cash. The cheques received by them have been deposited in their bank account (as detailed in order of assessment). Copies of Final registered documents are placed on record.
Substantial portion of the lands were sold by the farmers and deal in respect of other portion of lands were in the state of conclusion with other buyers before the farmers appeared before the A.O. to record their statement in the course of assessment proceedings. The very important fact of selling away the agriculture lands to some other person either directly or through other power attorney holders was not disclosed by them. Prima-facie, the statements given by them the A.O. concealing material facts are misleading and false.
If the entire admissible evidence on record, the conclusions of the assessing officer and uncontroversial facts as above are kept in juxtaposition and analyzed, the only conclusion which could be drawn by any reasonable person would be that the assessee has made no payment other than payment of Rs. 15,00,000/- & Rs. 10,00,000/- towards the agriculture lands in question in Financial year 200-07 & the deal did not see light of day so far as assessee was concerned.
It is a well settled principle of law that in the income tax proceedings, facts of life, human probabilities and economic realities cannot be ignored as held in the case of CIT v. Durga Prasad more (1971) 82 ITR 540(SC), Juggilal Kamlapat v. CIT (1969) 73 ITR 702 (SC) and Sumati Dayal v. CIT (1995) 214 ITR 801(SC). A statement recorded under Section 132(4) is a valid and relevant piece of evidence but a statement made u/s 132(4) cannot be made a sole basis for any such addition unless corroborated by seized material. If any admission is made in a statement recorded u/s 132(4), this can be used with reference to any piece of evidence found during the course of search. Recording of some questions after verification could be viewed as an involuntary statement, extracted from the deponent. In any case, a possibility of such inference is always there. With regard to such statement, the CBDT has issued instructions vide Circular No. 286/2/2003-IT, wherein it has been directed that search party shall not obtain confessions, so, the admission made under Section 132(4) cannot be treated even as a valid piece of evidence. Had there been a valid statement, even then, solely on the basis thereof, addition could not have been made this is a well settled principle of law by now and there are umpteen decisions in support of this view. (Kindly refer 12 ITR (Trib) 376 Saveetha Institute of Medical & Technical Sciences.
In the light of above facts, the assessee requests that the opportunity may kindly be allowed to cross examine the Farmers to ascertain the true fact. The assessee is prepared to meet the cost of proceeding. In the proceeding of assessment, the A.O. did not allow the assessee reasonable opportunity to cross examine the farmers.
In the light of above submission it is requested that no addition as proposed in notice of enhancement is warranted in assessment year 2007-08 The following documents are placed on record for ready reference.:
Copy of LPS-12/Page 30 to 34 Copy of LPS-12/Page 29 Copy of LPS-12/Page 6 to 14 Copy of LPS-12/Page 25 to 27 Copy of order sheet entry dt. 27.11.08 Copy of affidavit before ADI by P.O.A. Copy of registered deed as per annexure-A (4 Nos.) Copy of statements recorded of Farmers by A.O. (3Nos.) Annexure-A S.No. Seller Purchaser Amount Area Date 1 Jagdish, Dilip Kaushalya Bai, Mishrilal, Parvat Singh Ajab Singh, Bhamri bai Through P.O.A. dt.25.03.2007 Manoj Nayar M/s. Shubh Infrastructure Kotwali Road, Bhopal 45,00,000/-
4.50 acres
31.03.2007 2 Jagdish, Dilip Kaushalya Bai, Mishrilal, Parvat Singh Ajab Singh Bhamri Bai. (Directly by farmers) Smt. Shakuntala Rai & Maneesh Rai 14,58,000/-
1.20 acres 07.06.207 3 Jagdish, Dilip Kaushalya Bai, Mishrilal, Parvat Singh Ajab Singh Bhamri bai, Through P.O.A., dt. 31.03.09 Animesh Tiwari Smt. Krishna Mudgal & Asim Mudgal 60,00,000/-
4.32 acres 17.08.09 4 Jagdish, Dilip Kaushalya Bai, Mishrilal, Parvat Singh Ajab Singh, Bhamri bai (Directly by Farmers) Aninash Parita & Sunita Parita 1,23,45,000/-
8.23 acres 31.03.09 Thus the entire addition of Rs. 3,06,00,000/- may kindly be deleted."
40. By the impugned order, the ld. CIT(A) confirmed the addition of Rs. 20 lakhs in the assessment year 2006-07 and Rs. 50 lacs in assessment year 2007-08 after having the following observations :-
"13.3 I have examined the issue. The document seized is an agreement. Appellant had made advance payment against this agreement. In the statement recorded by the Assistant Director of Income-Tax (Investigation), Bhopal, the appellant has deposed (in answer to question no. 14) that " I have paid Rs.70,00,000/- advance in the year 2006" This shows that the fact of advance payment as per the agreement seized was admitted. The agreement was entered on 27.03.2006. it stipulates that Rs. 20,00,000/- advance has already been given and balance Rs. 50,00,000/- is to be paid on 30.04.2006. the figure of advance payment made at the time of entering the agreement and advance payment made on 30.04.2006 totals to Rs. 70,00,000/- This fact collaborates with the statement that the appellant had paid Rs. 70,00,000/- advance in the year 2006. As per page no. 7 of seized file LPS-1 it is already established that the appellant had received Rs. 16,00,000/- from 6 persons as advance for sale of this land (refer ground of appeal no. 2.7) out of the advance received at Rs. 16,00,000/- the advance of Rs. 2,00,000/- received from Shri Rajesh Agrawal was shown by the appellant. On page 97 of seized file LPS-13, the detail of expenses of Rs. 351498/- for development of land are mentioned. In view of these facts it is established beyond doubt that the appellant had entered into agreement for purchase of the land as per agreement seized. It has also been found that the appellant had not purchase the land but had only made payment of advance. The amount of advance payment is only Rs. 70,00,000/- The A.O. had originally made the addition of Rs. 20,00,000/- on account of this agreement. The amount of addition has been increased to 3,06,00,000/- by passing order 154. The facts of the case clearly show that the total investment of Rs. 70,00,000/- only has been made by the appellant as advance and he has not finally purchased the land and there is no evidence for payment of balance amount as per agreement. The facts of the case also show that advance of Rs. 20,00,000/- was paid on the date of agreement i.e. 27.03.2006 and advance of Rs. 50,00,000/- has been paid on or about 30.04.2006. In view of these facts the addition of Rs. 3,06,00,000/- for the assessment year 2006-07 is reduced to Rs. 20,00,000/-. This ground of appeal is partly allowed.
13.4 Since the advance of Rs. 5000000/- is paid in P.Y. relevant to assessment year 2007-08, the addition for that amount is to be made in assessment year 2007-08. The total income of assessment year 2007-08 is enhanced by Rs. 5000000/- on this account. "
Against the above order of CIT (A) both the assessee and revenue are in appeal before us:
41. We have considered the rival submissions and found from record that seized paper LPS-12 is an agreement dated 27.3.2006 for sale of agricultural land measuring 26.5 acres as placed at paper book 150-153. There were five owners of the land and seven Power of Attorney holders on behalf of the land owners. The Assessing Officer took value of land @ Rs. 17 lakhs per acre. Total land claimed as sold by these original land owners was 18 acres, hence the cost to the purchaser was taken by AO at 18 x Rs. 17 lakhs = Rs. 3,06,00,000/-. The Assessing Officer made addition of this amount in the assessee's income. After considering the submission made before the CIT(A), which found place at page 27 to 32 of the CIT(A)'s order, the CIT(A) has reduced the addition to Rs. 70 lakhs. The CIT(A) has duly discussed the findings of Assessing Officer at pages 13 to 27 of his appellate order. The CIT(A) has also considered submission of the assessee on page 13 para 13.2 of his order. The ld. CIT(A) observed that in the assessment u/s 153A dated 31.12.2008, the Assessing Officer added Rs. 20 lakhs in place of Rs. 306 lakhs. Thereafter, the Assessing Officer rectified the order u/s 154 wherein entire amount of Rs. 3,06,00,000/- was added. Meanwhile, the CIT(A) issued a notice of enhancement on 7.2.2012 for making further addition of Rs. 2,97,50,000/-, which is prior to the order of Assessing Officer passed u/s 154. After considering the submission made by the assessee alongwith the documentary evidence and the findings recorded by the ld.CIT(A), we found that initial agreement to sale dated 27.03.2006 was executed in favour of power of attorney and assessee. However, finally the sale of land was made by landlords to third parties directly and assessee was not concerned with those dealings. The copies of concerned sale deeds found place at pages 125 to 227 of the paper book. However, at the time of initial statement which was recorded in the mid night of 5.1.200-7, the assessee has suggested that advance of Rs. 70,00,000/- was given by him till date of search. However, in the second statement recorded on 9.1.2007 during the course of search proceedings itself, the assessee has corrected himself and admitted that he had paid only Rs. 20 lakhs in cash towards his transaction. This statement of assessee is supported by document found during course of search itself. There was acknowledgement of money receipt dated 3.11.2006, which mentions that seven Power of Attorneys holders paid Rs. 74 lakhs to five land holders as part payment. However, the assessee was not a power of attorney holders. There was also undated agreement for sale/purchase of this agricultural land between five land owners and seven Power of Attorney holds on the first part and assessee on the second part for payment of consideration. This agreement was falling in the financial year 2006-07 relevant to assessment year 2007-08. The payment of Rs. 20 lakhs was made on 27.03.2006. The agreement dated 27.03.2006 as found during the course of search on its back clearly mentions that the assessee had made payment of Rs. 20 lakhs in cash. This amount was held to be unaccounted by the ld.CIT(A) in the A.Y. 2006-07. Thereafter, the payment of Rs. 15 lakhs was paid by cheque. The seven power of attorney holders filed an affidavit dated 5.2.2007 before the Investigation Wing stating that the following payments were made to land-owners:-
Para of affidavit Payer Amount ( Rs.) Date
1.
By 7 POA holders 7,00,000 15.04.2006
2. Appellant. By cheque 16,20,000 15.04.2006
3. Subhash Jain POA holder.
By cheque 3,80,000 15.04.2006
4. Appellant. Cash 3,00,000 15.04.2006
42. The statement of land owners clearly indicate that assessee Shri Shyam Manohar Agarwal has paid a sum of Rs. 15 lakhs on 30th April, 2006, and no payment other than this was received from him. As no payment was received from assessee Shri Shyam Manohar Agarwal, the agreement was cancelled. In the affidavit filed by the land owner dated 5.2.2007 in which it is mentioned that the agreement was disputed. Even though at page 60, the Assessing Officer has stated that for purchase and sale of land at Pipalner, payment of Rs. 70 lakhs was made. The Bank account of farmers have also been discussed by Assessing Officer at page 16, reply to question no. 6. It was stated by land owner that in the office of Shri Shyam Manohar Agarwal, their account was kept and when ever they have asked for money, the receipt for same was given to him. Out of the money received from Shri Shyam Manohar Agarwal, some amount was deposited in the bank, which were duly recorded in their pass book. However, there was no evidence of any amount more than Rs. 20 lakhs in the pass book of land owners. Even as per the bank account reproduced by the Assessing Officer at page 16 & 17 in his order, the total deposit of all the owners of the land was Rs. 11.60 lakhs only. At page 19, the Assessing Officer has given details of investment made by the farmers/land owners, who sold the land. The total investment during the period under consideration is Nil. Hence, no addition was considered by the ld.CIT(A) for the investment made by the farmers, which the Assessing Officer quoted to support his case for giving money to them by the assessee. As per the finding recorded at page 31 tabular form by CIT(A), shows that there is no sale of land by the assessee during the financial year 2005-06 relevant to assessment year 2006-07. Even the seized documents BS-3 Register, which shows sale of part of the land to some persons for total amount of Rs. 3.90 lakhs also falls during the financial year 2006-07 relevant to assessment year 2007-08.
43. After going through the statement of assessee recorded u/s 132(4), documents found during the course of search, affidavit given by the Power of Attorney holders, we can conclude as under :-
(1) After going through the seized paper LPS-12, which is agreement dated 27.3.2006 for sale of agricultural land measuring Rs. 23.65 crores, we found that there are five owners of the land, namely, Shri Mishrilal, Shri Jagdish, Shri Dilip, Shri Parwat Singh and Shri Ajab Singh. There were seven power of attorney holders on behalf of the land owns, namely, Shri Kotwani, Shri Ram Babu Agarwal, Shri Vineet Raj Patni, Shri Sanjay Sharma, Shri Jawahar Kotwani and Shri Subhash Jain and Shri Umesh Shukla. While framing the assessment u/s 153A dated 31.12.2008, the Assessing Officer has made addition of Rs. 20 lakhs instead of Rs. 3,06,00,000/-. Thereafter, the Assessing Officer passed order u/s 154, wherein an addition of Rs. 3,06,00,000/- was made. It appears that prior to Assessing Officer's action for passing order u/s 154, the ld. CIT(A) has issued enhancement notice dated 7.2.2012 for making further addition of Rs. 2,97,05,000/-. As per the initial statement recorded in the mid night of 5.1.2007, the assessee has stated that advance payment of Rs. 70 lakhs was given by him till date of search. However, in the second statement recorded on 9.1.2007 during course of search itself, the assessee has tried to correct himself and admitted that he had paid only Rs. 20 lakhs in cash towards this transaction. After carefully perusing the seized records and the affidavit given by the Power of Attorney holders, we found that acknowledgement for money receipt dated 3.11.2006 mentions that seven Power of Attorney holders paid Rs. 74 lakhs to the five land owners as part payment towards land. This payment does not concern the assessee. Only the payment made by the assessee can be added to his income. We found that as per the seized documents vis-à-vis statement given by the assessee total payment of Rs. 70 lacks was made by assessee, initially a payment of Rs. 20 lakhs was made by assessee on signing the agreement. As per the seized agreement dated 27.3.2006, the assessee was required to pay further balance of Rs. 50 lakhs till 30th April, 2006. Thus, first statement given by the assessee on 5.1.2007 to the effect that advance payment of Rs. 70 lakhs was given by him till date corroborates these payments. Thus, the figure of advance payment made at the time of entering the documents dated 27.3.2006 amounting to Rs. 20 lakhs falls in the financial year 2005-06 relevant to assessment year 2006-07. Accordingly, addition of Rs. 20 lakhs was correctly confirmed by the ld.CIT(A) in the assessment year 2006-07. Since the balance payment of Rs. 50 lakhs was made up to 30th April, 2006, falling in the financial year 2006-07 relevant to the assessment year 2007-08, the ld. CIT(A) has correctly enhanced assessment for assessment year 2007-08 by Rs. 50 lakhs. Thus, the total addition of Rs. 70 lakhs made till the date of search, corroborates with the statements recorded on 5.1.2007 to the effect that the assessee has made payment of Rs. 70 lakhs till date of search. While confirming the addition of Rs. 70 lakhs, the ld. CIT(A) has also recorded a finding to the effect that as per seized file LPS-I, the assessee had received Rs. 16 lakhs from six persons as advance for further sale of this land. Out of the advance received at Rs. 16 lakhs, the advance of Rs. 2 lakhs was receive from Shri Rajesh Agrawal through account payee cheque, which was found to be duly recorded in the regular books of account of assessee. The ld. CIT(A) also recorded a finding to the effect that at page 97 of the seized page LPS-13, the details of expenses of Rs. 3,51,498/- for development of this land are mentioned. In view of these facts, it was established that the assessee had entered into agreement for purchase of land as per agreement seized. There is no evidence of any payment by the assessee beyond Rs. 70 lakhs. As per the affidavits filed by Power of Attorney holders, it is clear that some payment was made by them. The payments made by power of attorney holders cannot be considered in the hands of assessee for making addition in his income. Only the payment made by the assessee is required to be considered. After recording detailed finding in para 13, and after duly controverting the finding recorded by the Assessing Officer, the ld. CIT(A) had reached to the conclusion that since only amount of Rs. 70 lakhs was given by the assessee, addition to be made in the hands of the assessee, during the relevant assessment year should be as under :-
(i) Rs. 20 lakhs paid on the date of agreement i.e. 27.3.2006 - financial year 2005-006 relevant to assessment year 2006-07.
(ii) Rs. 50 lakhs paid on or about 30th April, 2006, - F.Y. 2006-07 relevant to assessment year 2007-08.
44. The detailed finding recorded by the ld.CIT(A) are is as per material on record, accordingly, we confirm the action of CIT(A) for upholding addition of Rs. 20 lakhs in the assessment year 2006-07 and Rs. 50 lakhs in the assessment year 2007-08.
A.Y. : 2007-08 :45. In the assessment year 2007-08, the assessee is aggrieved for addition of Rs. 25,50,000/-. The Assessing Officer has discussed the issued at page 6 and the CIT(A) has dealt with the issue at page 33, para 14.
46. The facts of the issue in brief are that the assessee has shown to have received loans from various parties totaling to Rs. 25,50,000/- The A.O. asked the assessee to produce copies of ledger account, bank statement and return of income from creditors. The assessee did not submit any of these documents before the A.O. The A.O. held that the identity and creditworthiness of the creditors and genuineness of transaction was not proved and made addition of Rs. 25,50,000/- u/s 68.
47. Before the CIT(A), the contention of ld. Authorized Representative was as under :
"Detailed submission on this ground has already be made in the statement of facts filed along with the appeal memo. (Copy of extract is enclosed). The assessee has filed confirmation letters of the creditors and filed PAN number and address of creditors on record. A request was made to the A.O> to summon these creditors. It is pertinent to note that the assessment proceedings were started on 28.11.2008 when return of income was filed. In a very short duration of one month, the assessment has been finalized in hurried manner. The assessee has discharged the primary onus cast on him under the provisions of Section 68. The addition of Rs. 25,50,000/- deserves to be deleted. The observations of the A.O. are reproduced on this issue:-
"In the order sheet entry dated 08.12.2008 assessee was asked to finished bank statement, return of income and physical production of all the lenders. On which assessee made submission that All the advances and loans have been received in cheques and also furnished detail that above amount has been returned back in later years. But assessee has failed to produce the lenders/ persons who have given advances for verification; moreover assess is not able to submit bank statement and return of income of the persons whose names are appearing in the above table. As regards land advances shown by assessee. In the order sheet entry dated 10.10.2008 assessee was specifically asked to furnish copy of agreement. On which assessee submitted that there is no formal agreement.Therefore,identity, creditworthiness & genuineness of following credits remain unproved.
With regard to above cash credits onus of the assessee stands discharged only when following three conditions were fulfilled by the assessee, namely :
Identify Creditworthiness Genuineness of the transaction During the assessment proceedings, assessee was specifically asked to produce the lender, submit their bank statements, return of income etc. assessee is not able to submit any details regarding their creditworthiness and genuineness of the transaction. And in the case of land advances as claimed by assessee, no detail of any agreement has been furnished by assessee. In the case of land advances also no detail of bank statement, return of income and even PAN was furnished. This fact is important that all such land advances which are appearing in seized document were taken in account and duly accepted those cash credits as genuine cash credit.
Therefore, in order to discharge his onus of proving identity, creditworthiness and genuineness of the transactions assessee only furnished confirmation letters from lenders. These confirmation letters do not give any details about creditworthiness and no details of source of income of the lenders have been furnished by the assessee. Copy of bank statement of the lenders was also not furnished by the assessee. Even the return of income of lenders as specifically asked was not furnished by the assessee.
Since assessee has failed to discharge his onus to prove three vital aspects of the cash credits viz. Identity, Creditworthiness, Genuineness of the transactions in respect of lender, the amount of Rs. 25,50,000/- is charged to income tax as the income of the assessee for the relevant Financial year u/s 68 of the Income-tax Act, 1961. Since assessee has shown above amount as his cash credits, therefore assessee has concealed particulars of his income and I am hereby satisfied to initiate penalty proceeding u/s 271(1)(c) is initiated separately."
The list if creditors/land advance parties amounting to 25,50,000/- is as under:-
Date Name of Person Amount Total amount 04.10.2006 Divine City Pvt. Ltd.
5,00,000 12.10.2006 Divine City Pvt. Ltd.
5,50,000 16.10.2006 Divine City Pvt. Ltd.
3,00,000 24.10.2006 Divine City Pvt. Ltd.
1,00,000 06.11.2006 Divine City Pvt. Ltd.
5,00,000 19,50,000 16.10.2006 Anil Kumar Sehgal 50,000 01.07.2006 Baldev Mohan Lal Garg 19,000 01.08.2006 Baldev Mohan Lal Garg 1,000 03.10.2006 Baldev Mohan Lal Garg 1,30,000 1,50,000 03.07.2006 M.M. Jwellers 2,00,000 In the alternative, it is submitted that appropriate relief by way of set-off of undisclosed credits assessed as assessee's own money in Financial year 05-06 relevant to assessment year 06-07 amounting to Rs. 78,60,000/- which has been shown to have been re-paid during the Financial year 2006-07 relevant to assessment year 2007-08 may be allowed and the addition of Rs. 25,50,000/- may kindly be deleted. "
48. By the impugned order, the ld. CIT(A) confirmed the addition after having the following observations :-
"14.3 I have examined the facts. It is evidence that the appellant had not discharged his onus to prove the identity and creditworthiness of the creditors and genuineness of transactions. Hence the addition of Rs. 25,50,000/- is confirmed. The issue of telescoping of various unaccounted income and application thereof is to decided separately. This ground of appeal is dismissed."
49. We have considered the rival submissions and found from record that addition was made in respect of following creditors:
1Rajesh/Manjula Agrawal 2,00,000 2 Divine City Pvt. Ltd 19,50,000 3 Anil Kumar Sehgal 50,000 4 Baldev Mohan Garg 1,50,000 5 M.M. Jewellers 2,00,000 25,50,000 Out of the above additions made by the Assessing Officer, a sum of Rs. 2 lakhs was received from Rajesh/Manjula Agarwal through account payee cheque no. 783658 dated 9.12.2006, Dena Bank, Bhopal. The assessee has also filed confirmation. This amount was returned by cheque no. 147969 on 24.3.2007. The amount was received as well as repaid in the very same assessment year 2007-08 by account payee cheque. Similarly, we found that payment of Rs. 2 lakhs was received from M.M. Jewellers vide cheque no. 808666 dated 1.7.2006 of Punjab National Bank, Marwari Road, Bhopal. This also was repaid by cheque no. 147961 dated 24.1.2007 of Bank of India. Both receipt and payment were through account payee cheques and account was squared up during the very same year.
50. Addition was also made by the Assessing Officer in respect of amount received from M/s. Divine City Private Limited, Bhopal. We found that the amount was received as advance for sale of shopping mall. A sum of Rs. 5.50 lakhs was received vide cheque no. 053988 dated 11.10.2006 of Indian Overseas Bank. A sum of Rs. 5 lakhs was received vide cheque no. 053992 dated 3.11.2006 of Indian Overseas Bank. The assessee has furnished ledger account of Divine City Private Limited. Advance was finally adjusted against the transaction of sale.
51. In view of the discussion made hereinabove, out of total addition of Rs. 25.50 lakhs, we restore the following additions to the file of the AO for deciding afresh after considering the documents filed by the assessee to substantiate the advances received by him :-
1. Rajesh/Manjula Agarwal Rs. 2 lakhs.
2. Anil Kumar Sehgal Rs. 50,000/-
3. M.M. Jewellers Rs. 2 lakhs
4. M/s. Divine City P.Ltd. Rs.10.50 lakhs
52. In the result, finally, the addition of Rs. 10.50 lakhs ( Rs. 25.50 lakhs (-) Rs. 2 lakhs (-) Rs. 50,000/- (-) Rs. 2 lakhs (-) Rs. and Rs. 10.50 lakhs) `is confirmed.
53. Ground was also raised by the ld. Authorized Representative in the A.Y. 2007-08 on account of addition of rental income. The facts of the issue in brief are that the appellant owns a property situated at Nayapura Lal Ghati, Tehsil Huzur, Bhopal. This property has given on rent to M/s. Shri Sainath Marbles as per the rent agreement seized during the course of search this property is given on monthly rent of Rs. 14,000/- The A.O. held that this premises was given on rent during the year in appeal also. He found that the appellant had shown rental income of Rs. 13,000/- only. He worked out the rental income for the whole year at Rs. 1,68,000/- and made addition of Rs. 1,55000/- on this account.
54. Before the CIT(A), contention of ld. Authorized Representative was as under :-
"Copy of rent agreement executed between Shri Sainath Marble and the assessee has been found during the course of search and the same is marked as LPS-7/age 52 to 54. This agreement has been executed on 14.01.2002. According the this agreement , for a period of 11 month, starting from 1.11.2001 and ending 30.09.2002, property situated at Nayapura Lalghati, Bhopal has been given to the lessee for a month rent of Rs. 14,000/- which was payable monthly. The lessee was also required to provide security deposit of Rs.50,000/-. Copy of the agreement has been seized during the course of search. Therefore, the provisions of Section 292C are applicable and it is presumed, until shown contrary, that the contents of such a document are true. During the course of entire search and assessment proceeding, no evidence is found to rebut the statutory presumption. Thus according to this agreement it is presumed that I) assessee has received rent of Rs. 56,000/- in Financial year 2001-02, 2) security deposit of Rs. 50,000/- in Financial year 2001-02 and 3) Rent of Rs. 98,000/- in Financial year 2002-03. Thus the total addition in different year is calculated as under:-
Ass. yr Rent shown Amount received as per agreement Addition made by A.O. Addition sustainable Remarks 2002-03 36,000/-
56,000/-
Security deposit 20,000/-
50,000/-
20,000/-
--
Security deposit is not income 2003-04 3,000/-
98,000/-
1,65,000/-
95,000/-
The A.O. has calculated addition on the basis of this agreement even in subsequent years without realizing that the lease agreement was valid only for a period of 11 months. There is no iota of evidence on record which can suggest that the agreement had been renewed for further periods. The agreement found during the course of search is presumed to show true state of affair. No addition on the basis of certain imaginary receipts of rent can be sustained in future periods. Thus all the additions made by the A.O. on account of alleged undisclosed rent in A.Y. 2004-5 to 2007-08 cannot be sustained. The addition of Rs. 1,55,000/- made by the A.O. may kindly be deleted."
55. By the impugned order, the ld. CIT(A) confirmed the action of Assessing Officer after having the following observations :-
"I have examined the issue. The appellant has taken plea that the agreement was only for 11 months but has not negated the fact that the premises was still given on rent during the year in appeal. The appellant has shown rental income of Rs. 13,000/- this fact confirms that the premises is given on rent during the year in appeal also. In view of the above it is held that the addition of Rs.1,55,000/- as undisclosed rental income is valid hence the same is confirmed. This ground of appeal is dismissed."
56. The issues have been dealt with by us in the assessment year 2005-06, following the same reasoning, we confirm the addition of Rs. 1.55 lakhs on account of rent.
57. The assessee is also aggrieved for addition of Rs. 15,78,200/- on account of not showing the alleged sale of land to Mr. Ishwarlal Mehta. The facts of the issue in brief are that the appellant had purchased a land at village Baron, bypass road, Bhopal from Shri Nemichand Jain vide agreement registered on 17.02.1996. The purchase price was Rs. 15,78,200/- as is evident from seized documents LPS-12/17. The A.O. mistook the amount of purchase as amount of sale and made the impugned addition in the A.Y. 2007-08. By the impugned order the CIT (A) sustained addition of Rs. 3 lacks after observing that the transaction of purchase is done in Financial year 1995-96 and the appellant has received advance of Rs. 3,00,000/- in A.Y. 2007-2008. Against this order of CIT (A), both assessee and revenue are in appeal before us.
58. It is clear from the findings recorded by CIT(A) that the assessee has received advance of Rs. 3 lakhs during A.Y. 2007-08, which was not recorded in the books of account, accordingly, the ld. CIT(A) has confirmed the addition of Rs. 3 lakhs and deleted the balance addition in so far as purchase of land at Village Baron, Bye Pass Road, Bhopal, was registered on 17.2.1996, which falls beyond the block period. Thus no addition of purchase price paid on 17.2.1996 can be made in the A.Y. 2007-08. Accordingly, we do not find any infirmity in the order of CIT(A), for confirming addition of Rs. 3 lacks received by assessee during the A.Y. 2007-08.
In the result ground taken by assessee and revenue are dismissed.
59. Next grievance of the assessee was that the ld. Assessing Officer has erred and was not justified on facts and law in making addition of Rs. 2,25,000/- on account of various loan/land advances u/s 68.
60. The facts of the issue in brief are that as per the seized documents LPS-7 page 52 to 54, LPS-12 page 15, BS-3, page, BS-3 page 1 to 3 the appellant had received loans and land advance totaling to Rs. 2,25,000/- the appellant did not explain these transactions. The A.O. held that the transaction recorded are to be held as genuine u/s 292C and made addition of Rs. 2,25,000/-.
61. By the impugned order, the ld. CIT(A) confirmed the addition after having following observations :-
17.3 I have examined the statement of facts submitted alongwith form no. 35. The appellant has just narrated the transactions of receipt but has not shown source thereof. In view of the above it is held that the impugned addition of Rs. 2,25,000/- is valid. The issue of telescoping unaccounted income with unaccounted application is to be decided separately. This ground of appeal is dismissed."
We have considered the rival contentions and in view of the findings recorded by the CIT(A) at para 17.3 of his appellate order, no interference is required for sustaining the addition of Rs. 2.25 lacs.
In the result, the ground taken by the assessee is dismissed.
62. In the assessment year 2007-08, the assessee is also aggrieved for addition of Rs. 17,95,000/- u/s 40a(ia) for not making TDS. Facts in brief are that during course of search, the Assessing Officer found that payment was made to M/s. Teja Construction in respect of RCC work, Plinth work, plaster work etc. done by him, for which bill no. 261 of Rs. 17.95 lakhs dated 18.12.2006 was raised. It was found that payment was not properly accounted for in the regular books of accounts. The Assessing Officer observed that the payment to Teja Construction , attract TDS provision u/s 194C, accordingly, he disallowed the payment and added Rs. 19,75,000/- in assessee's income. By the impugned order, the ld. CIT(A) confirmed the action of the Assessing Officer against which the assessee is in further appeal before us.
63. Ld. Authorized Representative appearing on behalf of the assessee contended that the assessee has not claimed the expenditure in respect of payment made to M/s Teja Construction, in its profit and loss account while computing business income, therefore, no disallowance is warranted in respect of expenditure not claimed in the profit and loss account. He further submitted that since the payment remained unaccounted, proper telescoping should be allowed against the income surrendered by the assessee in respect of land advance and cash credit received by it during this year as well as in preceding year.
64. We have considered the rival submissions and found from record that addition of Rs. 19.75 lakhs was made in assessee's income u/s 40a(ia). However, it is clear from the bill no. 261 dated 18.12.2006 that bill amount was Rs. 17.95 lakhs and not Rs. 19.75 lakhs. Further, we found that assessee has not claimed this expenditure in its profit and loss account, therefore no disallowance is warranted u/s 40a(ia) but at the very same time, this amount was found to be not recorded in the regular books of account, therefore, if any addition is to be made, the same should be on account of "unaccounted payment" made by the assessee. Accordingly, we confirm the addition of Rs. 17.95 lakhs on the plea that the amount has been paid by the assessee to M/s Teja Construction without recording the same in its books of account. The assessee's plea of allowing telescoping of this payment out of addition made for unaccounted receipts will be considered lateron.
65. The assessee is aggrieved for addition of Rs. 10.00 lacs as per seized file LPS-1. The facts of the issue in brief are that in per page no. 8 of seized file LPS-1, the transaction of Rs.1000000/- entered. In the statement recorded on 05.01.2007 the appellant admitted that he had received Rs.1000000/- from Harish Bhai. The A.O. found that the document is admissible u/s 292C and that the transaction entered in the document is not entered in accounts. Hence he made impugned addition of Rs.1000000/-
66. Before CIT (A) the appellant has made following submissions:
"Facts in respect of this item of addition have already been submitted in Statement of facts.
If this addition is sustained on the ground of application of Section.292-C, it is submitted that the receipt of cash amounting to Rs.10,00,000/- out of books may kindly be considered as receipt out of books and the same may kindly be adjusted/telescopes with various additions made on account of undisclosed income and un-explained expenditure detailed as under :-
Ground No. 3.11(Un-explained expenditure of Rs.2,90,000/- Ground No. 3.9 (Un-explained payment of Rs. 3,00,000/-) Ground No.3.12 (Un-explained payment of Rs.6,85,000/- to Kaushlya Devi)"
67. By the impugned order, the CIT(A) had confirmed the addition after observing as under :-
"19.3 I have examined the issue. It is found that the transaction entered in the seized document have been admitted by the appellant and it is not disputed in the written argument submitted before me. In view of the above, the impugned addition of Rs. 10,00,000/- is confirmed. This ground of appeal is dismissed."
68. We have considered the rival contentions and gone through the orders of the authorities below. In view of findings recorded by the CIT(A) at para 19.3, we do not find any infirmity in the finding of the CIT(A) for confimingthe addition of Rs. 10 lacs in respect of transaction found recorded in the seized document indicating receipt of Rs. 10 lacs from Shri Harish Bhai. Nothing was brought on record by the learned AR to purusade us to deviate from the findings arrived at by the lower authorities.
69. In the result, the ground taken by the assessee is dismissed.
70. The Revenue is aggrieved for deletion of addition of Rs. 4,70,000/- added by the AO on account of agricultural income.
71. The facts of the issue in brief are that the appellant is having 34.66 acre of irrigated land. The A.O. held that the appellant has not submitted formal agreement of batai hence he rejected appellants claim of earning agriculture income and made addition of Rs.470000/-.
72. Before the CIT(A) the assessee has made following submissions:
"The A.O. has observed as under:-
1. In the order sheet entry dated 10.10.2008 assessee was asked to furnish following details:
"Datails of Agriculture produces
a) Sale bill of Agriculture produces
b) Kashra Khatoni
c) Purchase of Seeds & Fertilizers
d) Lease Agreement
e) Purchase agreement of the land at Sehore"
In response to which assessee made the following Submission:
"I have agriculture income from giving my land of patan (Sehore) 27.66 Acres and 6.76 total 34.42 Acres which I have given on batai and earned the same. However no formal agreement was doe with the person whom I have fiven the land on Batai. The copy of the land registry is being enclosed and marked as Annexure - I" since there is no formal agreement of Batai and assessee has shown agriculture income only after search has been taken place. Therefore agriculture income of Rs. 2,70,000/- shown by the assessee will be treated as his taxable income.
At the outset it is submitted that the agriculture income of only Rs.2,70,000/- has been shown by the assessee in the return of income. The addition of Rs.4,70,000/- has been made erroneously mistaken impression.
The facts in respect of this item of addition have already been submitted in statement of facts. The assessee is owning 34.66 acres of irrigated land which was given on Batai. Copy of proof of ownership of agriculture land and P-II certificates are enclosed herewith for sake of convenience. On irrigated land holding of 34.66 acres, agriculture income of Rs.2,70,000/- i.e. Rs.8,000/- per acre is perfectly justified. The entire addition of Rs.4,70,000/- treating agriculture income as income from undisclosed source is totally misconceived and deserves to be deleted.
73. By the impugned order the CIT(A) deleted the addition after having the following observations :-
"On examination it is found that assessee is owner of land which is having irrigation facilities. The A.O. has not found any evidence to disbelieve the cultivation of land and sharing of agriculture proceeds as per Batai Agreement. He has rejected the appellant's claim only on the basis that there is no formal agreement of batai. In bataidaar system normally formal agreements are not made hence this reason is not adequate for rejecting the appellant's claim of earning agriculture income. In view of the above, the addition of Rs.4,70,000/- is deleted. This ground of appeal is allowed."
74. We have considered rival contentions and find from record that the assessee was owning 34.66 acres of agricultural land which was given on Batai. Income of Rs. 2,70,000/- was shown out of this land. Assessee had filed P-II certificate to substantiate growing of crop on the land and also copy of proof of ownership of agricultural land. Income from agriculture worked out to be Rs. 8000/- per acre. CIT(A) had categorically recorded a finding that the AO had not found any evidence to disbelieve the cultivation of land and sharing of agicultural proceeds asper Batai agreement. CIT(A) further observed that in batai system, normally formal agreement of batai is not made hence the reason given by the AO for rejecting the assessee's claim of earning agricultural income is not adequate. The assessee had actually shown agricultural income of Rs. 2,70,000/- and not Rs. 4,70,000/-. The detailed finding recorded by CIT(A) has not been controverted. Accordingly, we do not find any infirmity in the order of CIT(A) for accepting agricultural income of Rs.2,70,000/-.
75. The Revenue is aggrieved for deletion of addition of Rs.17,00,000/- on account of payment made to Kaushalya Devi. The A.O.s finding on the issue is as under:
"In LPS-9, page No. 58 to 60 is an agreement between Kaushalya Devi and Shyam Manohar Agrawal for a land situated at 1.41 acre Khasra No. 1426, Bakaniya.
In this agreement Rs.3,00,000/- has been paid in cash and in the back side of page no. 60, Rs. 17,00,000/- has been received in cash by Kaushalya Devi. But in the cash book maintained by Shyam Manohar Agrawal the cash availability on 19.06.2006 is of Rs.8,58,719/- only. Therefore, payment of Rs.17,00,000/- has not been explained by the assessee company. And the same amount of Rs.17,00,000/- has been added is income of the assessee."
76. Before the CIT(A) the assessee has made following submissions:
"In LPS-9, Page No.58 to 60 is an agreement between Kaushanlya Devi and Shyam Manohar Agrawal for a land situated at 1.41 Acre Khasra No. 1426, Bakaniya.
In this agreement Rs. 3,00,000/- has been paid in cash and in the back side of page no. 60, Rs. 17,00,000/- has been received in cash by Kashalya Devi. But in the cash book maintained by Shyam Manohar Agrawal the cash availability on 19.06.2006 is of Rs.8,58,719/- only. Therefore, payment of Rs.17,00,000/- has been added as income of the assessee.
The facts of this issue have already been submitted in Statement of Facts. The assessee has entered into agreement of purchase of land from Smt. Kaushalya Devi on 23.03.2006 for total consideration of Rs.24.85 lakhs. The assessee has made payment of Rs.17,00,000/- in cash out of opening cash balance of Rs.9,58,719/- and out of cash receipt of Rs.8,75,000/- on that date and made payment of Rs.17,00,000/- to Smt. Kaushalya Devi. The cash receipt of Rs.8,75,000/- has been separately included in total income vide addition of Rs.1,32,49,600/- made by the A.O. (sum of Rs.8,75,000/- is enclosed for the sake of convenience. The payment of Rs.17,00,000/- is duly accounted in the books of account and no addition u/s69 is warranted in the facts and circumstances of the case. The same may kindly by deleted."
77. By the impugned order, the CIT(A) deleted the addition after having the following observations :-
"21.3 I have examined the issue. The Cash Book for F.Y. 2006-07 shows opening balance of Rs.858719/-. On the same day Rs.875000/- is received from Durga Prasad. On the same day payment of Rs.17,00,000/- to Kausalya Devi is show. In the assessment order A.O. as mentioned on the opening cash balance on 17.06.2006 & as not considered the next entry in the cash book showing Rs.875000/-. The cash book entries clearly show that the payment of Rs.17,00,000/- is made out of the cash balance on the days. The receipt of Rs.875000/- form Durga Prasad is shown in the detail of cash receipts in the schedule appearing in para 13 of the assessment order. The addition on account of unaccounted receipts of Rs.875000/- is conformed in para no.27.5 of this order below. In the of facts the impugned Rs.1700000/- is deleted. This ground of appeal is allowed."
78. Rival contentions have been considered and record perused. From record we find that in the cash book of the assesseefor the relevant A.Y. 2007-08 under consideration the assessee had shown opening cash balance of Rs. 8,58,719/-. On the very same day, the assessee received a sum of Rs. 8,75,000/- from Durgaprasad. Out of the opening balance and cash received from Durgaprasad, the assessee made payment of Rs. 17 lacs to Kaushaltyadevi. Even the AO has not disputed thefact of opening cash balance, however, he has not considered the next entry showing receipt of cash from Durgaprasad. Even in the schedule appearing in para 13 of the assessment order, receipt of rs. 8,75,000/- from Durgaprasad was duly shown. After recording the detailed findings at para 21.3, the learned CIT(A) held that since the assessee was having sufficient cash balance in the cash book, no addition was warranged in respect of payment made to Kaushalyadevi. It is pertinent to mention here that the CIT(A) himself has confirmed the adition of Rs. 8,75,000/- received from Durga Prasad in para 27.5. We do not find any infirmity in the order of the CIT(A) in deleting the addition of Rs. 17 lacs and confirm the adition of rs. 8,75,000/- as having received received from Durgaprasad. Availability of cash as on the date of payment was well established as per cash book of the assessee.
79. In the next ground the assessee is aggrieved for action of CIT(A) in confirming the addition of Rs. 3 lacs. The A.O.s finding on the issue is as under:
"Veena Vaswani - Shyam Manohar Agrawal Assessee is accepting payment of Rs.20,00,000/- to Smt. Veena Vaswani by following entries:
Payment Receipts 08.04.2006 Cash Rs.7,00,000/-
11.08.2006 BOI Rs.5,00,000/-
01.10.2006 Cash Rs.1,00,000/-
13.11.2006 Cheque Rs.4,00,000/-
16.11.2006 Cheque Rs.3,00,000/-
But in the back side of page 37 it was written that Shyam Manohar Agrawal had made payment of Rs.3,00,000/- in cash on 27.06.2006 which was not reflected in the submission of assessee.
Therefore, the amount of Rs.3,00,000/- will be added as income of the assessee."
80. Before CIT (A) the appellant has made following submissions:
"The A.O. has observed as under:-
2. LPS-3/page37 to 31 :
Veena Vaswani - Shyam Manohar Agrawal Assessee is accepting payment of Rs20,00,000/- to Smt. Veena Vaswani by following entries:
Payment Receipts 08.04.2006 Cash Rs.7,00,000/- 11.08.2006 BOI Rs.5,00,000/- 01.10.2006 Cash Rs.1,00,000/- 13.11.2006 Cheque Rs.4,00,000/- 16.11.2006 Cheque Rs.3,00,000/-
But in the back side of page 37 it was written that Shyam Manohar Agarwal had made payment of Rs. 3,00,000/- in cash on 27.06.2006 which was not reflected in the submission of assessee:
Therefore, the amount of Rs. 3,00,000/- will be added as income of the assessee. The facts in respect of this item of addition have already been submitted in statement of facts. The assessee has entered into agreement of purchase of land with Smt. Beena Baswani and made total payment of Rs. 20,00,000/- during the year. Copy of her account in books of accounts is enclosed for the sake of convenience. In the seized document, there is mention of cash payment of Rs.3,00,000/- which was not actually made and payment was made by cherub of Rs. 3,00,000/- on 16.11.2006. This cherub payment of Rs. 3,00,000/- was not found mentioned in seized document. The assessee has actually made payment of only Rs. 20 Lakhs against the agreement during the year and the entire sum is found recorded in books of accounts. The agreement was subsequently cancelled and the entire sum of Rs. 20 lakhs received back on 29.03.2007. During the course of proceeding confirmation of Smt. Beena Waswani was filed and she was also examined u/s 131. Therefore, no addition on this account is called for during Ass.Yr.2007-08. The addition of Rs. 3,00,000/- May kindly be deleted. In the alternative, the addition may be telescoped with the unaccounted receipt in cash of Rs.10,00,000/- and Rs. 2,25,000/- assessed u/s 68 during the year vide ground no 3.4 & 3.6 and the entire addition may kindly be deleted."
81. By the impugned order the CIT(A) confirmed the addition after having the following observations :-
"I have examined the issue. On examination it is found that the A.Os. finding that unaccounted payment of Rs. 300000/- on 27.06.2006 is not recorded in books of accounts. The payment is written in hand of the appellant hence the seized document is a reliable evidence. In view of the above, the addition of Rs. 3,00,000/- for unaccounted payment is confirmed. This ground of appeal is dismissed. "
82. We have consideredthe rival contentions and find from record that the addition of Rs. 3 lacs was made by the AO on account of cash received from Veena Vaswani. As this amount was not recorded in the regular books of accounts, addition was made. The amount was written in the hand-writing of the assessee on the seized document. Accordingly, we do not find any infirmity in the action of the CIT(A) in confirming the addition.
83. In the result, the ground taken by the assessee is dismissed.
84. The assessee is also aggrieved for addition of Rs.6,85,000/- on account of payment made to Mrs.Beena Baswani. The A.O.s finding is as under:
"In LPS-9/ Page 58 to 60 is an agreement between Smt. Kaushalya devi and Shyam Manohar Agrawal for the land situated at Khasra No. 1426 rakba 1.4 acre Patweri Halka No. 29. This agreement has been duly executed and the payment of Rs.24,85,000/- has been done by Shyam Manohar Agrawal. In the order sheet entry dated 14.11.2008 assessee was asked to submit following details "In LPS-9/Page 70 to 63 details of an agreement with Smt. Kaushalydevi were shown where agreement were performed on Rs.6,85,000/- and one more agreement was performed on in LPS-9/Page 60 to 5 of Rs.24,85,000/-"
"As agreement was entered on 30.06.06 of an amount of Rs.685 Lakhs for the same land and same land and Mr. Shyam Manohar Agrawal has paid Rs. 2,00,000/- in cash and Rs.4.85 Lakhs by cherub dated 03.07.2006. The copy of the registry is being enclosed. The accounting voucher/ copy of ledger is being enclosed.
The same property was sold by Mr. Shyam Manohar Agrawal to aarpita Bansal Bhopal on 26.10.2007j at the sale consideration of Rs.8.50 Lakhs. And the profit earned on it will be shown in the Income Tax Return of 2007-06. The copy of the registry is being enclosed. The accounting voucher/ copy of ledger is being enclosed."
Regarding agreement of Rs.24.85 Lakhs as appearing in the LPS-9/ Page 16, Khasra No.1426. Whereas, agreement of Rs.6.85 Lakhs duly disclosed by the assessee is situated in Khasra No. 1436. In the back side of LPS-9/Page 60, Rs.70.00 Lakhs has been received by Kaushalyadevi which was duly disclosed as per cash book produced but as far as LPS-9/Page 70 to 67 is concern, the amount has not been duly disclosed in the return filed. Therefore, amount of Rs. 6,85,000/- will be added as income of the assessee."
85. Before CIT(A) the appellant has made following submissions:
"This ground has been amended by the assessee to rectify typing mistake in name of the person to whom payment of Rs. 6,85,000/- has been made.
The A.O. has observed as under:-
In LPS-9/ Page 58 to 60 is an agreement between Smt. Kaushalyadevi and Shyam Manohar Agrawal for the land situated at Khasra No. 1426 rakba 1.4 acre Patwari Halka No. 29. This agreement has been duly executed and the payment of Rs.24,86,000/- assessee was asked to submit following details. "in LPS-9/ Page 70 to 63 details of an agreement with Smt. Kaushalyadevi were shown where agreement were performed on Rs.6,85,000/- and one more agreement was performed on in LPS-9/ Page 60 to 55 of Rs.24,85,000/-"
On which assessee made following submission:-
"As agreement was entered on 30.06.06 of an amount of Rs.685 Lakhs for the same land same area and same landed Mr. Shyam Manohar Agrawal has paid Rs. 2,00,000/- in cash and Rs. 4.85 Lakhs by cherub dated 03.07.2006. The accounting voucher/copy of ledger is being enclosed.
The same property was sold by Mr. Shyam Manohar Agrawal to Aarpita Bansal Bhopal on 26.10.2007 at the sale consideration of Rs. 8,50 Lakhs. And the profit earned on it will be shown in the income tax Return of 2007-08. The copy of the registry is being enclosed. The accounting voucher / copy of ledger is being enclosed."
Regarding agreement of Rs. 24.85 lakhs as appearing in the LPS-9/ Page 16, Khasra No. 1426. Whereas, agreement of Rs. 6.85 Lakhs duly disclosed by the assessee is situated in Khasra No. 1436/ in the back side of LPS-9 / Page 60, Rs.1,70,000/- has been received by Kaushalya Devi which was duly disclosed as per cash book produced but as far as LPS-9/Page 70 to 67 is concern, the amount has not been duly disclosed in the return filed. Therefore amount of Rs. 6,85,000/- will be added as income of the assessee.
The payment of Rs.6,85,000/- made to Smt. Kaushalya Devi is fully accounted in the books of the assessee. In the facts and circumstances of the case, when the entire payment has been accounted for in the books of the assessee, there is no occasion to apply provisions of Section 69 and to make addition of Rs. 6,85,000/- which deserves to be deleted.
In the alternative, the addition may be telescoped with the unaccounted receipt in cash of Rs. 10,00,000/- and Rs. 2,25,000/- assessed u/s 68 during the year vide ground No. 3.4 & 3.6 and the entire addition may kindly be deleted."
86. By the impugned order, CIT(A) confirmed the addition after having the following observations :-
"I have examined the issue. The payment of Rs. 6,85,000/- made to Smt. Kaushalya Devi is evident in the seized document referred in the assessment order. The appellant has not been able to explain the source of these expenditure hence addition of Rs. 6,85,000/- on account of unaccounted expenditure is confirmed. This ground of appeal is dismissed. "
87. Rival contentions have been considered and record perused. From record we find that as per the seized documents, theassessee has made a payment of Rs. 6,85,000/- to Smt. Kaushalyadevi as per the seized document found during the course of search. As the assessee was unable to explain the source of this payment, the action of the AO was confirmed by the CIT(A). We do not find any infirmity in the action of the CIT(A) in confirming the addition of Rs. 6,85,000/- on account of unaccounted payment made to Kaushalyadevi.
88. In the result, ground taken by the assessee is dismissed.
89. In the next ground the assessee is aggrieved for retaining addition of Rs. 80,49,600/- out of total addition of Rs. 1,32,49,600/- made by the AO on account of refund of land advance. The A.O. has made an addition of Rs.1,32,49,600/- on account of refund of land advance by the assessee. By the impugned order, CIT(A) sustained the addition of Rs. 80,49,600/-. Both the assessee and the Revenue are in appeal before us.
90. The A.O.s findings on the issue are as under:
"Following land advances has been received back by the assessee as per his submission:
Name of the assessee Date Amount Bank Statement Provided Return Income Provided Beena Waswani 29.03.2007 20,00,000 No No Madan Mohan Tapadiya 20.04.2006 7,00,000 No No 25.06.2006 10,00,000 No No 07.07.2006 15,00,000 No No 10.07.2006 14,00,000 No No 13.07.2006 15,00,000 No No 18.07.2006 10,00,000 No No 20.07.2006 15,00,000 No No Durga Prasad 08.04.2006 1,80,000 No No 08.04.2006 1,25,000 No No 13.04.2006 1,00,000 No No 08.05.2006 50,000 No No 18.05.2006 50,000 No No 19.05.2006 1,50,000 No No 17.06.2006 8,75,000 No No Chitra Balwani 12.12.2006 4,00,000 No No Rahul Agrawal 7,19,600 No No Total (Rs.) 1,32,49,600 In the order sheet dated 15.12.2008 assessee was asked to furnish following details:
1. Bank Statement, return of income of following persons Beena Waswani Madan Mohan Tapadiya Durga Prasad Nirmala Jain Shiv Narayan Abhay Mehta Ram Baboo Agrawal Mohd. Timal Hasmukh Kothari Chitra Balwani Rahul Agrawal Rajeev Thakral Jain Kumar Jain Mamta Jain
2. Cancellation agreement with following persons :
Beena Waswani Madan Mohan Tapadiya Durga Prasad Nirmala Jain Shiv Narayan Abhay Mehta Ram Baboo Agrawal Mohd. Timal Hasmukh Kothari Chitra Balwani Rahul Agrawal Rajeev Thakral Jai Kumar Jian Mamta Jain With regard to above cash credits onus of the assessee stands discharged only when following three conditions were fulfilled by the assessee, namely:
Identity Creditworthiness Genuineness of the transaction During the assessment proceedings, assessee was specifically asked to produce the lender, submit their bank statements, return of income etc. Assessee is not able to submit any details regarding their creditworthiness and genuineness of the transaction. And in the case of land advances as claimed by assessee, no detail of any agreement has been furnished by assessee. In the case of land advances also no detail of bank statement, return of income and even PAN was furnished. This fact is important that all such land advances which are appearing in seized document were taken in account and duly accepted those cash credits as genuine cash credit.
Therefore, in order to discharge his onus of proving identity, creditworthiness and genuineness of the transaction assessee only furnished confirmation letters from lenders. These confirmation letters do not give any details about creditworthiness and no details of source of income of the lenders have been furnished by the assessee. Copy of bank statement of the lenders was also not furnished by the assessee. Even the return of income of lenders as specifically asked was not furnished by the assessee.
Since assessee has failed to discharge his onus to prove three vital aspects of the cash credits viz. Identity, Creditworthiness, Genuineness of the transaction in respect of lender, the amount of Rs. 1,32,49,600/- is charged to income tax as the income of the assessee of the relevant Financial year u/s 68 of the Income-tax Act, 1961."
91. Before CIT (A) the assessee has made the following submissions:
"Following land advances has been received back by assessee.:
Name of the assessee Date Amount Remark Beena Waswani (confirmation filed. Party examined on oath u/s 131) 29.03.2007 20,00,000 20,00,000 Refund of earlier advance on cancellation of land deal Madan Mohan Tapadiya (confirmation filed : party examined on oath) 20.04.2006 7,00,000 This sum has been paid by the assessee and not received 25.06.2006 10,00,000
--do--
07.07.2006 15,00,000
--do-
10.07.2006 14,00,000 Received back earlier advance on cancellation on land deal 13.07.2006 15,00,000 18.072006 10,00,000 20.07.2006 15,00,000 84,00,000 Durga Prasad (Affidavit filed on record confirming the transaction) 08.04.2006 1,80,000 Land advance received as per seized material 08.04.2006 1,25,000 13.04.2006 1,00,000 08.05.2006 50,000 18.05.2006 50,000 19.05.2006 1,50,000 17.06.2006 8,75,000 15,30,000 Chitra Balwani (Affidavit filed on record confirming the transaction) 12.12.2006 4,00,000 4,00,000 Land advance received on behalf of Chandra Kumar Jain LPS 12/37-41 as per seized material Rahul Agrawal 7,19,600 7,19,600 Advance received for purchase of Shop from assessee. The shop was registered next year. Copy of registry filed on record. The A.O. raised no query regarding this transaction during the course of assessment proceeding.
The A.O. has applied provisions of Section 68 adnd added back the entire amount as income from un-disclosed sources. Item wise facts in respect of each item of addition have been provided in the Statement of Facts. The summarized submission on each item of addition is as under :-
Smt. Beena Waswani. Rs. 20,00,000/-
Kindly refer to Ground No. 3.9 and observations of A.O. which are as under :-
4. LPS-3/Page 37 to 31 :
Veena Vaswani - Shyam Manohar Agrawal Assessee is accepting payment of Rs. 20,00,000/- to Smt. Veena Vaswani by following entries:
Payment Receipt 08.04.2006 Cash Rs.7,00,000/-
11.08.2006 BOI Rs.5,00,000/-
01.10.2006 Cash Rs.1,00,000/-
13.11.2006 Cheque Rs.4,00,000/-
16.11.2006 Cheque Rs.3,00,000/-
But in the back side of page 37 it was written that Shyam Manohar Agarwal had made payment of Rs. 3,00,000/- in cash on 27.06.2006 which was not reflected in the submission of assessee.
Therefore, the amount of Rs. 3,00,000/-will be added as income of the assessee.
The assessee has entered into an agreement of purchase of land from Smt. Beena Waswani and made payment of Rs. 20,00,000/- during the year. This agreement was subsequently cancelled and Smt. Beena Waswani sold the land to another person vide registered sale deed dt. 29.03.2007 (Copy of sale deed is enclosed for ready reference). Smt. Beena Waswani received Rs. 20,00,000/- in cash as sale proceed of the land and refunded the amount to the assessee immediately. The assessee has filed confirmation of Smt. Beena Waswani during the course of the proceeding and she appeared before the A.O. u/s 131 and her statement was also recorded on oath. Since the sum was received in cash on sale of land, there was no relevance of her bank account. The assessee has discharged his primary onus, cast on him u/s 68 and source of the sum of Rs. 20,00,000/-has also been established. The addition of Rs. 20,00,000/- made by the A.O. applying provisions of Sec 68 deserves to be deleted.
Madan Mohan Tapadia Rs. 84,00,000/-
The assessee has entered into agreement of purchase of piece of land at Lalghati, Bhopal on 1-12-2005. The assessee has made payment of Rs. 57,00,000/- to the Mr. Rajiv Tapadia and Madan Mohan (hereinafter referred as Mr. Tapadia) during F.Y. 2005-06. The assessee has made further payment of 32,00,000/- to them out which Rs. 10,00,000/- was paid in cash and balance Rs. 22,00,000/- was made in cheque. Copy of account of Mr. Tapadia in books of the assessee for both the years are as under :-
Financial Year 2005-06 Ledger : Adv. Tapadiaya,s, 6000 ft, Lalghati Date Particulars Vch Type Debit Credit 14.11.2005 Cr CASH PAID.,21/1, 29/7,2/1-5.1/58-62, 6000 SFT. LAND PURCHASED FROM Mr. M.MTAPADIAY & RAJIVE TAPADIYA SITUATED AT LALGHATI SUQRE, NAYAPURA FOR 100.00 LACS, PAID Rs.13.00 LACS IN05-06 & 22.0 LACS IN 06-07 cash payment 12,00,000.00 02/12/2005 Cr Ch.No: 210361, 21/1,29/7,2/1-5,1/58-62, 6000 SFT. LAND PURCHASED FROM MR. M.M.TAPADIAY & RAJIVE TAPADIYA SITUATED AT LALGHATI SQURE, NAYAPURA FOR 100.00 LACS, PAID Rs.13.00 LACS IN05-06 & 22.0 LACS IN 06-07 Bank of India payment 8,00,000 28/01/2006 Cr CASH PAID:
21/1,29/7,2/1-5,1/58-62, 6000SFT. LAND PURCHASED FROM MR. M.M.TAPADIYA & RAJIVE TAPADIYA SITUATED AT LALGHATI SQURE, NAYAPURA FOR J100.00 LACS, PAID Rs.13.00 LACS IN05-06 & 22.0 LACS IN 06-07 Cash Payment 15,00,000.00 28/02/2006 Cr CASH PAID:
21/1,29/7,2/1-5,1/58-62, 6000SFT. LAND PURCHASED FROM MR. M.M.TAPADIYA & RAJIVE TAPADIYA SITUATED AT LALGHATI SQURE, NAYAPURA FOR 100.00 LACS, PAID Rs.13.00 LACS IN05-06 & 22.0 LACS IN 06-07 Cash Payment 17,00,000.00 18/03/2006 Cr Ch. No.: 210364 21/1,29/7,2/1-5,1/58-62, 6000SFT. LAND PURCHASED FROM MR. M.M.TAPADIYA & RAJIVE TAPADIYA SITUATED AT LALGHATI SQURE, NAYAPURA FOR 100.00 LACS, PAID Rs.13.00 LACS IN05-06 & 22.0 LACS IN 06-07 Bank of India Payment 5,00,000.00 Dr. Closing Balance 57,00,000.00 57,00,000.00 Financial year 2006-07 1-Apr-2006 to 31-Mar-2007 Adv. Tapadiay,s, 6000 ft. Lalghati Square Date Particulars Vch Type Debit Credit 01/04/2006 To Opening Balance 57,00,000.00 20/04/2006 To Bank of India Payment 7,00,000.00 25/06/2006 To Cash Payment 10,00,000.00 07/07/2006 To Bank of India Payment 15,00,000.00 10/07/2006 By Cash Receipt 13/07/2006 By Cash Receipt 18/07/2006 By Cash Receipt 20/07/2006 By Cash Receipt By Closing Bal.
89,00,000.00 89,00,000 In this table, the A.O. has erroneously treated payment of Rs. 32,00,000/- made to Mr. Tapadia as receipt from them and included the same as sum received while calculating the figure of Rs. 86,00,000/-. In fact, the assessee has received back only Rs. 54,00,000/- from Mr. Tapadia on cancellation of agreement. Confirmation of Mr. Tapadia and cancellation deed was filed on record during the course of assessment proceeding. Mr. Madan Mohan Tapadia appeared before the A.O. and his statement was recorded u/s 131. In the immediate past, the assessee has paid them Rs. 54,00,000/- in cash which was lying un-utilized with them which was refunded by them back to assessee on cancellation of land deal. Mr. Tapadia is an old resident of Bhopal having huge landed property at Bhopal. They have constructed a huge commercial complex at Marwari Road during the relevant period. Since the sum was received in cash on sale of land, there was no relevance of their bank account. The assessee has discharged his primary onus cast on him u/s 68 and source of the sum of Rs. 54,00,000/- has also been established. The addition of Rs. 86,00,000/- made by the A.O. applying provisions of Sec 68 deserves to be deleted. In fact addition of Rs. 32,00,000/- out of above sum of Rs. 84,00,000/- was not covered u/s 68 as this sum was not received but paid by the assessee to Mr. Tapadia and the payment was duly incorporated in books of accounts. The balance sum of Rs. 54,00,000/- was received in cash on cancellation of land deal which was initially paid by the assessee in cash to Mr. Tapadia. In the alternative, it is submitted that appropriate relief by way of set-off of undisclosed credits assessed as assessee's own money in F.Y. 05-06 relevant to A.Y.06-07 amounting to Rs.78,60,000/- which has been shown to have been re-paid during the F.Y.2006-07 relevant to A.Y.2007-08 may be allowed and entire addition may be deleted."
92. By the impugned order, after having the following observations, the addition was reduced to Rs. 80,49,600/- :-
"27.3 By the impugned order, after hearing following observation, the addition was reduced to Rs. 80,49,600/-
"I have examined the issue. In respect of the repayment of Rs. 20,00,000/- received on 29.03.2007 from Beena Waswani, it is found that in para 9, the A.O. had mentioned that payment of Rs. 20,00,000/- was made to same person from 08.04.2006 to 16.11.2006. The same amount have been received back on 29.03.2007 from the same person. In view of the this fact the addition of Rs. 20,00,000/- on account of repayment from Beena Waswani is deleted.
27.4 Ledger a/c of Shri Tapadia available in assessment record. The Ledger A/c shows that the amount of Rs. 7,00,000/-is paid on 20.04.2006, Rs. 10,00,000/- is paid 25.06.2006 and Rs. 15,00,000/- is paid on 07.07.2006. All these payments are done through cheque and description of payment is done in the ledger A/c. The A.O. has wrongly taken these figures as refund of advances. This shows that the addition of Rs. 32,00,000/- has been inadvertently made by the A.O. The total refund of advances comes to Rs. 54,00,000/- in view of the above addition of Rs. 86,00,000/- is reduced to Rs. 54,00,000/-
27.5 The source of advanced introduced in name of Durga Prasad, Chitra Balwani and Rahul Agarwal amounting to Rs. 28,49,600 in unexplained.
27.6 In view of the above the impugned addition is reduced from Rs.1,32,49,600 to Rs. 80,49,600."
93. Against the above order of IT(A) both the assessee and Revenue are in appeal before us.
94. Rival contentions have been considered. From record we find that the assessee was in receipt of loanm from various persons as narrated by the AO in para 27.2 of his order. As per the AO the total of such loan taken by the assessee works out to be Rs. 1,32,49,600/-. We find that the addition was made by the AO in respect of the following loans/refund of land advance :-
Veena Vaswani Rs. 84,00,000/-
Madan Mohan Taparia Rs. 84,00,000/-
Durgaprasad Rs. 15,30,000/- Chitra Balwani Rs. 4,00,000/- Rahul Agrawal Rs. 7,19,600/-
By observing that the assessee was to prove the identity, credit worthiness and genuineness of transactions, the entire amount of Rs. 1,32,49,600/- was added to the assessee's income by the AO. After considering the assessee's submissions, the CIT(A) observed that Rs.20 lacs was received by the assessee on 29.3.2007 from Veena Vaswani which was repayment of loan already given by the assessee. The assessee has received payment of Rs.20 lacs from Veena Vaswani as under :-
8.4.2006 - Cash - Rs. 7 lacs 11.8.2006 -Bank of India - Cheque - Rs. 5 lacs 1.10.2006 -Cash - Rs. 1 lac 13.11.2006- Cheque - Rs. 4 lacs 16.11.2006- Cheque - Rs. 3 lacs We find that the assessee has entered into agreement for purchase of land from Veena Vaswani for which payment of Rs. 20 lacs was made during the year. Subsequently this agreement was cancelled and Veena Vaswani sold the land to another person vide registered sale deed dated 29.3.2007. Copy of regisered sale deed is enclosed with the paper book. On such sale Veena Vaswani received Rs.20 lacs in cash as sale proceeds of land and refunded this amount to the assessee immediately. The confirmation from Veena Vaswani was filed before the AO during the course of assessment proceedings. Veena Vaswani also appeared before the AO u/s 131 and her statement was also recorded on oath. Thus, we find that the assessee has discharged his primary onus cast on him u/s 68 of the Act. After recording detailed finding in para 27.3, the CIT(A) deleted the addition. No interference is called for in the action of the CIT(A) in deleting the same.
95. With regard to the addition of Rs. 84 lacs made in respect of the amount received from Madan Mohan Taparia, we find that the assessee has entered into agreement for purchase of land with Madan Mohan Taparia on 1.12.2005. The payment of Rs. 57 lacs was made to Madan Mohan Taparia and Rajeev Taparia during the year 2005-06. During the year, under consideration, further payment of Rs. 32 lacs was made out of which Rs. 22 lacas was by way of account payee cheque and Rs. 10 lacs was paid in cash. Copy of account of Taparia in the books of accounts of the assessee was filed before the lower authroities. After considering the documents filed on record, the CIT(A) observed that the AO has erroneously treated the payment of Rs.32 lacs made to Taparia as receipt from them andincluded the same as sum received while calculating the figure of Rs. 86 lacs. It was further observed that the assessee was in receipt of Rs. 54 lacs only from Taparia on cancellation of agreement. The confirmation of Mr. Taparia and cancellation deed was also filed on record during the course of assessment procedings. Shri Madan Mohan Taparia also appeared before the AO and his statement was recorded u/s 131. Since Rs. 32 lacs was not received by the assessee but it was payment made by the assessee to Mr. Taparia. The CIT(A) held that the only addition of Rs. 54 lacs (Rs. 84 lacs (-) Rs. 32 lacs) was warranted. It is further fortified by the statement given by Taparia u/s 131 wherein he has accepted having made the payment of Rs. 54 lacs to the assessee. Accordingly, CIT(A) confirmed the addition of Rs. 54 lacs which was received in cash on cancellation of land deed which was initialy paid by the assessee to Taparia. We do not find any reason to interfere with the finding recorded by CIT(A) which is as per the material on record. Accordingly, we confirm the CIT(A)'s action for confirming the addition of Rs. 54 lacs.
96. After consdiering the assessee's submissions, the CIT(A) confirmed the addition in respect of the amount received from Durgaprasad, Chitra Balwani and Rahul Agrawal amounting to Rs. 28,49,600/-. Nothing was brought on record by the learned AR to pursuade us to deviate from the finding recorded by the lower authorities. Accordingly, no interference is required in the findings recorded by the CIT(A) in confirming the addition of Rs. 28,49,600/-.
97. In view of the above, total addition made by the AO at Rs. 1,32,49,600/- was reduced by the CIT(A) to Rs. 80,49,600/-. In view of the discussion made hereinabove, we do not find any infirmity in the order of the CIT(A) in sustaining the addition of Rs. 80,49,600/-.
98. In the result, the ground taken both by the assessee and revenue are dismissed.
99. The assessee is also aggrieved for addition of Rs. 2,90,000/- made on account of making alleged payment to the contractor.
100. The A.O.s finding on the issue is as under:
"In LPS-13/Page 97 total expenses on development of Palasi Road and Pipalner Road were entered which comes around Rs. 3,51,498 out of which advance of Rs.1,95,000/- and Rs. 95,000/- totaling to Rs. 2,90,000/- were recorded. In the order sheet entry dated 14.11.2008 this query has been asked.
"LPS-13/Page 97 is the copy of quotation given by WBM Road Maker/ Repairs. No. accounting effect."
The contention of the assessee is not acceptable u/s 292C and the amount of Rs. 2,90,000/- is added as income of the assessee."
101. Before CIT(A) the assessee has made following submissions:
"3. In LPS-13 / Page 97 total expenses on development of Palasi Raod and Pipalner Road were entered which comes around Rs. 3,51,498/- out of which advance of Rs. 1,95,000/- and Rs. 95,000/- totaling to Rs. 2,90,000/- were recorded. In the order sheet entry dated 14.11.2008 this query has been asked. On which assessee made following submission:
"LPS-13/Page 97 is the copy of quotation given by WBM Road Maker / Repairs No accounting effect."
The contention of the assessee is not acceptable u/s 292C and the amount of Rs.2,90,000/- is added as income of the assessee.
The facts in respect of this item of addition have already been submitted in Statement of Facts. The addition deserves to be deleted in the facts and circumstances of the case.
In the alternative, the addition may be telescoped with the unaccounted receipt in cash of Rs. 10,00,000/- and Rs. 2,25,000/- assessed u/s 68 during the year vide ground No. 3.4 & 3.6 and the entire addition may kindly be deleted."
102. By the impugned order the CIT(A) confirmed the addition after having the following osbervations :-
"I have examined the issue. The appellant has not been able to show any reason as to why the transaction recorded in seized document are not correct. The seized document clearly shows that payment of Rs. 2,90,000/- has been made for development of properties at Palasi Road and Pipalner Road. The expenditure of Rs. 2,90,000/- is unaccounted hence the impugned addition of Rs. 2,90,000/- is confirmed. This ground of appeal is dismissed."
103. We have considered the rival contentions and carefully gone through the orders of the lower authorties. From record we find that transaction recorded in the seized document clearly shows payment of Rs. 2,90,000/- made for development of properties at Palasia Road. Since the expenditure was not accounted for in the regular books of accounts, the AO was justified in making the addition which has been correctly upheld by CIT(A). Accordingly, there is no reason to interfere with the orders of the lower authorities for making the addition.
104. In the result, the ground taken by the assessee is dismissed.
65. In terms of our discussion in para 43, we confirm the enhancement of income by Rs. 50 lacs in the A.Y. 2007-08 on account of payment made for Pipalner land.
66. Now coming to the ground taken with regard to telescoping of unaccounted receipts against unaccounted payments. The plea of the assessee before the CIT(A) was that addition for unaccounted income as well as unaccounted application of income generated from unaccounted sources should be allowed. The assessee has asked for telescoping the unaccounted income with the unaccounted application with the form of unaccounted expenditure, payments, investments and the refunds. The submission of the assessee before the CIT(A) was as under :-
" It is respectfully submitted that the secrets profits are undisclosed income of an assessee earned in an earlier assessment year may constitute a fund from which the assessee may draw subsequently for meeting expenditure or introducing amount in his account book. The reliance in this regard is placed on various decisions of Apex Court, High Court and Jurisdictional Tribunal as per Annexure. The assessee has relied on the following judicial precedents :-
S.no.
Citation Name of the case
1. 123 ITR 457 (S.C.) Anantram Veersingia & Co. vs. CIT
2. 144 ITR 143 (MP) Dharamdas Agarwal vs. Addl. CIT
3. 144 ITR 140 (MP) Addl. CIT v. Ghai Lime Stone Co.
4. 115 ITR 438 (MP) CIT vs. Sahu Bros.
5. 51 ITR 757 (Mad) S.Kuppuswami Mudliyar vs. CIT
6. 189 ITR 320 ( P & H) CIT VS. Prem Chand Jain
7. 165 ITR 453 (Raj) CIT v. Tyarmal Bal Chand
8. 10 ITJ 150 (Trib)(Indore) Rakesh Tapadia vs. DCIT
67. After considering assessee's contentions and after deliberating on the case laws, the CIT(A) allowed telescoping of unaccounted receipts, which were added in various years, against the unaccounted payments and expenditure made by the assessee. The precise observation of the CIT(A) was as under :-
"28.1 On examination it is found that the ratio laid in the judgements referred above are applicable in the appellant's case for the reason that additions for both unaccounted income and unaccounted expenditure, unaccounted investments and unaccounted refunds have been confirmed in this order. The funds available through unaccounted income are to be telescoped with their application in unaccounted expenditure and investment and unaccounted refunds. In view of the above, the funds generated through various additions of unaccounted income confirmed are telescoped to the unaccounted expenditure, unaccounted investment and unaccounted refunds as under :-
A.Y. A. Addition confirmed for unaccounted income B. Relief on account of telescoping of funds out of additions confirmed with unaccounted expenditure investment 2005-06 Rs. 20,45,000 = unexplained cash credit Nil 2006-07 Rs. 94,60,000/- = unexplained cash credit Rs. 14,00,000/-= unaccounted receipts Rs. 20,00,000/- payment of advance for Pipalner land Rs. 1,29,05,000/- = amount available for telescoping Rs. 20,00,000/- = Total amount telescoped 1,09,05,000/- = Balance available for telescoping in subsequent year 2007-08 Rs. 2,25,000/- = Unaccounted receipts Rs.10,00,000/-= Unaccounted receipts Rs. 3,00,000/-= payment to Beena Waswani Rs. 2,90,000/-=Investment in road construction. Rs. 6,85,000/-= investment in purchase of land Rs. 3,00,000/-= unexplained investment in purchase of land. Rs. 50,00,000/- = payment of advance of Pipalner land Rs. 55,55,000/-= unexplained refund of land advances except amount received from Durga Prasad (part of addition of Rs. 1,32,49,600/- made in assessment order) Rs. 1,21,30,000/- = funds available for telescoping against application in assessment year 2007-08 Rs. 1,21,30,000/- = total unaccounted income telescoped with unaccounted expenditure and investment.
The Assessing Officer is directed to allow relief, in appeal effect order, on account of telescoping at Rs. 20,00,000/- in assessment year 2006-07 and Rs. 1,21,30,000/- in assessment year 2007-08 as mentioned in column B of the schedule given above."
68. It is clear from the above that telescoping has been allowed by the ld.CIT(A), in respect of unaccounted payments made out of the unaccounted income added in assessee's income in various years. From the record, we found that assessee was in the business of real estate for which payment was invariably received as advance for sale of land. The assessee has also booked some cash credit in its books of account so as to meet its requirement of cash in the business. As the assessee could not substantiate the correct source of receipt of land advance and cash credit, the same were added by the Assessing Officer in assessee's income. Substantial part of such addition was also confirmed by the ld.CIT(A). We also found that the assessee was also making payment of land and incurring expenditure which was not accounted for in the regular books of accounts. Such unaccounted payment was out of unaccounted receipts only. Therefore, we do not find any infirmity in the order of CIT(A) allowing telescoping of payment out of the land advance and cash credit available with him and which has been added by the Assessing Officer as assessee's unaccounted income. Once the unaccounted receipt has been added in assessee's income, payment out of such receipts cannot be again added in assessee's income on the plea of unaccounted payment otherwise it will amount to double addition. Considering the decision of Hon'ble Supreme Court in the case of Anant Ram Veer Singhai & Co. 123 ITR 457, jurisdictional High Court in the case of Dharamdas Agarwal, 144 ITR 143 ( M.P.) and other cases cited by the ld. Authorized Representative, principally we do not find any infirmity in the order of CIT(A) for allowing telescoping of payments against the receipts.
In ground no. 5 the Revenue is aggrieved by the order of the learned CIT(A) for allowing deduction of Rs. 1,21,30,000/- on account of telescoping of unaccounted income with unaccounted expenditure and investment. Rival contentions have been heard and record perused. From record we find that the CIT(A) has allowed telescoping of unacounted expenditure and investment against the unaccounted income of the assessee as per discussion and table at para 28.1 of his order. As per the principle laid down by the Supreme Court in the case of Anant Ram Vir Singhia & Company (supra), the Hon'ble jurisdictional High Court in the case of Dharamdas Agrawal (supra) and Ghai Stone Company (supra) we find justification in the action of the CIT(A) for allowing telescoping of expenditure and investment against the addition upheld on account of unaccounted income. However, the quantum of deduction allowed by CIT(A) is not correct. We found that the CIT(A) has allowed telescoping of Rs. 55,55,000/- in respect of unexplained refund of land advance which was added by the AO as assessee's income in respect of unaccounted refund of land advance and cash credit amounting to Rs. 1,32,49,600/-. We find that the addition of Rs. 1,32,49,600/- was made by the AO in respect of cash credit/land refund received from Smt. Veena Vaswani, Madan Mohan Taparia, Durgaprasad, Chitra Balwani and Rahul Agrawal. Since this addition was not on account of unaccounted expenditure/investment, there is no merit in the action of the CIT(A) in allowing telescoping of such amount. Thus, the CIT(A) has wrongly allowed telescoping of such income of Rs. 55,55,000/- against total addition of income of Rs. 1,32,49,600/- made in the assessment order. As per our consdiered view, since Rs. 55,50,000/- was added on account of unaccounted income and not on account of unaccounted payment/expenditure, the CIT(A) was not justified in allowing telescoping of such income. Only unaccounted expenditure and investment can be telescoped against unaccounted income. Since Rs. 55,50,000/- was not part of any unaccounted payment/expenditure, therefore, there is no justification in allowing telescoping of Rs. 55,50,000/- as per table given by the CIT(A) in para 28.1. Keeping in view the addition finally upheld by us on account of cash credit/land advance vis-à-vis payment and expenditure in terms of our discussion hereinabove against telescoping of Rs. 1,41,30,000/- allowed by the CIT(A), we restrict the telescoping to the extent of Rs. 1,04,20,000/-. Accordingly, the revised calculation is worked out as under :-
A.Y. A. Addition confirmed for unaccounted income B. Relief on account of telescoping of funds out of additions confirmed with unaccounted expenditure investment 2005-06 Rs. 13,10,,000 = unexplained cash credit, as per para 7 Nil 2006-07 Rs. 23,24,000/- = unexplained cash credit, as per para 28 Rs. 14,00,000/-= unaccounted receipts, as per para 37 Rs. 3,50,000/- payment to Dilip Kukreja as per para 33.
Rs. 20,00,000/- payment of advance for Pipalner land, as per para 44.
Rs. 50,34,000/- = amount available for telescoping Rs. 23,50,000/- = Total amount telescoped.
26,84,000/- = Balance available for telescoping in subsequent year 2007-08 Rs. 10,50,000/- unaccounted receipts, as per para 52 Rs. 3,00,000/- unaccounted receipts, as per para 58.
Rs. 2,25,000/- = Unaccounted receipts , as per para 61 Rs.10,00,000/-= Unaccounted receipts, as per para 68 Rs. 80,49,600/- unaccounted receipts, as per para 97 Rs. 3,00,000/-= payment to Beena Waswani, as per para 82.
Rs. 2,90,000/-=Investment in road construction, as per para 103.
Rs. 6,85,000/-= investment in purchase of land, as per para 87.
Rs. 17,95,000/- = payment to Teja Construction as per para 64.
Rs. 50,00,000/- = payment of advance of Pipalner land, as per para 44 Rs. 1,33,08,600/- = funds available for telescoping against application in assessment year 2007-08 Rs. 80,70,000/- = total unaccounted income telescoped with unaccounted expenditure and investment.
Accordingly, the AO is directed to allow telescoping of expenditure and payment amounting to Rs.1,04,20,000/- i.e. 23,50,000/- in the A.Y. 2006-07 and Rs. 80,70,000/- in the A.Y. 2007-08 as against telescoping allowed by CIT(A) at Rs. 1,41,30,000/- as per table at para 28.1.
In the result, ground taken by the revenue is allowed in part.
69. In the result, the appeals of the assessee and Revenue are allowed in part in terms indicated hereinabove.
This order has been pronounced in the open Court on 29th May, 2013.
Sd/-
Sd/-
(JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 29th May, 2013.
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